Externalities of Policy-Induced Scrappage: The Case of Automotive Regulations

Connor R. Forsythe, Akshaya Jha, Jeremy J. Michalek and Kate S. Whitefoot

No 30546, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many transportation policies indirectly affect vehicle travel and resulting externalities by inducing changes in vehicle scrappage rates. We leverage the staggered removal of state-level safety inspection programs across the United States within an instrumental variables (IV) framework to produce the first estimates of the fleet-size elasticities of fleet travel distance and gasoline consumption. Our first-stage estimates indicate that the removal of safety inspections caused a 3-4% increase in fleet size on average. Our IV estimates of the fleet-size elasticities of fleet travel distance and gasoline consumption have 95% confidence sets that imply rejection of an assumption commonly used in prior analyses that these elasticities are equal to one. Calculations based on fleet-size elasticities of one result in substantial overestimates of the externality costs from increases in travel and fuel use from delays in scrappage due to the removal of safety inspections.

JEL-codes: H23 H70 Q58 R48 (search for similar items in EconPapers)
Date: 2022-10
New Economics Papers: this item is included in nep-ene and nep-tre
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