Vehicle Scrappage and Gasoline Policy

Mark R. Jacobsen and Arthur A. van Benthem

American Economic Review, 2015, vol. 105, issue 3, 1312-38

Abstract: We estimate the sensitivity of scrap decisions to changes in used car values and show how this "scrap elasticity" produces emissions leakage under fuel efficiency standards, a process known as the Gruenspecht effect. We first estimate the effect of gasoline prices on used vehicle values and scrappage of vehicles with different fuel economies. We then estimate the scrap elasticity itself, which we find to be -0.7. When applied in a model of fuel economy standards, 13-16 percent of the expected fuel savings leak away through the used vehicle market. This effect rivals or exceeds the importance of the often-cited mileage rebound effect. (JEL H23, L62, L78, Q35, Q38, Q48, Q58)

JEL-codes: H23 L62 L78 Q35 Q38 Q48 Q58 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20130935
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