Winners and Losers: The Distributional Effects of the French Feebate on the Automobile Market
No 18-950, TSE Working Papers from Toulouse School of Economics (TSE)
I analyze the distributional effects of an environmental policy in the new automobile market: the French feebate. I quantify the monetary and environmental gains and losses that are due to this new automobile purchase tax/subsidy across consumers. I develop and estimate a structural model of the demand and supply for new cars that features a high level of heterogeneity in consumers' preferences. By exploiting data on car sales at the municipality level, I identify the heterogeneity parameters through the correlation that exists between household characteristics and car attributes across municipalities. I simulate the market equilibrium without the feebate to quantify the causal welfare and environmental effects of the feebate. The policy reduces average carbon emissions but increases the emissions of all the local pollutants, and the effects are heterogeneous across consumers, car manufacturers and pollutants. The performance of the feebate is very high for consumer surplus maximization, but there is room to increase manufacturers' profits and limit the emissions of local pollutants.
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