Does the Swiss Car Market Reward Fuel Efficient Cars? Evidence from Hedonic Pricing Regressions, a Regression Discontinuity Design, and Matching
To correct market failures due to the presence of negative externalities associated with energy consumption, governments have adopted a variety of policies, including taxes, subsidies, regulations and standards, and information-based policies. For example, labels that clearly convey energy consumption rates, associated costs, and emissions of conventional pollutants and CO2, have been devised and used in the last two decades in several countries. In 2003, Switzerland introduced a system of fuel economy labels, based on grades ranging from A to G, where is A best and G is worst, to assist consumers in making decisions that improve the fleet’s fuel economy and lower emissions. We use a dataset documenting all passenger cars approved for sale in Switzerland each year from 2000 to 2011 to answer three key research questions. First, what is the willingness to pay for fuel economy? Second, do Swiss drivers—or Swiss auto importers on their behalf—appear to do a one-to-one tradeoff between car purchase price and savings on fuel costs over the lifetime of the car? Third, does the label have an additional effect on price, all else the same, above and beyond that of fuel efficiency alone? Hedonic pricing regressions that exploit the variation in fuel economy across make-models, and over time within make-models, suggest that there is a (modest) capitalization of fuel economy into car prices. The diesel premium, however, exceeds the future fuel cost savings made possible by diesel cars, even at zero discount rates. An alternate calculation suggests that the fuel economy premium is consistent with a very low discount rate (2.5%). We use a sharp regression discontinuity design (RDD) based on the mechanism used by the Swiss Federal Office of Energy to assign cars to the fuel economy label to see if the label has an independent effect on price, above and beyond that of the fuel economy. The RDD approach estimates the effect to be 6-11%. To broaden the fuel economy range over which we assess the effect of the A label, we also deploy matching estimators, and find that the effect of an A label on car price is approximately 5%.
|Date of creation:||Feb 2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.feem.it/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David S. Lee & Thomas Lemieux, 2010.
"Regression Discontinuity Designs in Economics,"
Journal of Economic Literature,
American Economic Association, vol. 48(2), pages 281-355, June.
- David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
- David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs In Economics," Working Papers 1118, Princeton University, Department of Economics, Industrial Relations Section..
- Kotchen, Matthew J. & Moore, Michael R., 2007.
"Private provision of environmental public goods: Household participation in green-electricity programs,"
Journal of Environmental Economics and Management,
Elsevier, vol. 53(1), pages 1-16, January.
- Matthew J. Kotchen & Michael R. Moore, 2004. "Private Provision of Environmental Public Goods: Household Participation in Green-Electricity Programs," Department of Economics Working Papers 2004-07, Department of Economics, Williams College.
- Richard G. Newell & Juha Siikam�ki, 2014.
"Nudging Energy Efficiency Behavior: The Role of Information Labels,"
Journal of the Association of Environmental and Resource Economists,
University of Chicago Press, vol. 1(4), pages 555 - 598.
- Newell, Richard G. & Siikamäki, Juha, 2013. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Discussion Papers dp-13-17, Resources For the Future.
- Richard G. Newell & Juha V. Siikamäki, 2013. "Nudging Energy Efficiency Behavior: The Role of Information Labels," NBER Working Papers 19224, National Bureau of Economic Research, Inc.
- Guido Imbens & Karthik Kalyanaraman, 2012.
"Optimal Bandwidth Choice for the Regression Discontinuity Estimator,"
Review of Economic Studies,
Oxford University Press, vol. 79(3), pages 933-959.
- Guido Imbens & Karthik Kalyanaraman, 2009. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," NBER Working Papers 14726, National Bureau of Economic Research, Inc.
- Guido Imbens & Karthik Kalyanaraman, 2010. "Optimal bandwidth choice for the regression discontinuity estimator," CeMMAP working papers CWP05/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Imbens, Guido W. & Kalyanaraman, Karthik, 2009. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," IZA Discussion Papers 3995, Institute for the Study of Labor (IZA).
- Jonathan Murray & Nicholas Sarantis, 1999. "Price-Quality Relations and Hedonic Price Indexes for Cars in the United Kingdom," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 5-27.
- Eichholtz, Piet & Kok, Nils & Quigley, John M., 2009.
"Doing Well by Doing Good? Green Office Buildings,"
Berkeley Program on Housing and Urban Policy, Working Paper Series
qt507394s4, Berkeley Program on Housing and Urban Policy.
- Guido Imbens & Thomas Lemieux, 2007.
"Regression Discontinuity Designs: A Guide to Practice,"
NBER Technical Working Papers
0337, National Bureau of Economic Research, Inc.
- Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
- Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
- Alberto Abadie & Guido W. Imbens, 2011.
"Bias-Corrected Matching Estimators for Average Treatment Effects,"
Journal of Business & Economic Statistics,
Taylor & Francis Journals, vol. 29(1), pages 1-11, January.
- Abadie, Alberto & Imbens, Guido W., 2011. "Bias-Corrected Matching Estimators for Average Treatment Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 1-11.
- Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, 01.
- Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
- Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1082-1095, October.
- Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
- Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
- Robert Witt, 1997. "The demand for car fuel efficiency: some evidence for the UK," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1249-1254.
- Brounen, Dirk & Kok, Nils, 2011. "On the economics of energy labels in the housing market," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 166-179, September.
- Anna Matas & Josep-Lluis Raymond, 2009. "Hedonic prices for cars: an application to the Spanish car market, 1981-2005," Applied Economics, Taylor & Francis Journals, vol. 41(22), pages 2887-2904.
- Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2014.16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah)
If references are entirely missing, you can add them using this form.