West, Jeremy (2014-08). Essays on Transportation and Energy Efficiency Policy. Doctoral Dissertation. Thesis uri icon

abstract

  • This dissertation examines two questions of consumers' motor vehicle purchase and utilization. Both are related to policy variation induced by the U.S. Car Allowance Rebate System, better known as "Cash for Clunkers." First, we directly investigate the impact of Cash for Clunkers, which was an economic stimulus program aimed at increasing new vehicle spending by subsidizing the replacement of older vehicles. Using a regression discontinuity design, we show the increase in sales during the two month program was completely offset during the following seven to nine months, consistent with previous research. However, we also find the program's fuel efficiency restrictions induced the purchase of more fuel efficient but less expensive vehicles, thereby reducing industry revenues by three billion dollars over the entire nine to eleven month period. This highlights the conflict between the stimulus and environmental objectives of the policy. Second, we investigate a related topic. Due to the high political costs of raising the tax rate on gasoline, the United States government combats the negative externalities associated with gasoline consumption by regulating the fuel efficiency of new cars sold. However, the success of these Corporate Average Fuel Economy restrictions depends crucially on whether inducing households to drive more fuel efficient cars causes them to drive more miles, which would offset some or all of the reduction in gasoline consumption. We examine this question by applying a regression discontinuity design to exploit the increase in vehicle fuel efficiency induced among new car buyers in Texas during the Cash for Clunkers program in 2009. While new car buyers whose "clunker" was barely eligible for the subsidy drove a similar number of miles per year prior to the policy and are similar in other ways to barely ineligible new car buyers, they bought significantly more fuel efficient vehicles. However, they did not respond by driving more miles following the program. As a result, the increased fuel economy reduced gasoline consumption proportionally. This suggests that behavioral responses do not undermine the effectiveness of fuel efficiency standards.
  • This dissertation examines two questions of consumers' motor vehicle purchase and utilization. Both are related to policy variation induced by the U.S. Car Allowance Rebate System, better known as "Cash for Clunkers."

    First, we directly investigate the impact of Cash for Clunkers, which was an economic stimulus program aimed at increasing new vehicle spending by subsidizing the replacement of older vehicles. Using a regression discontinuity design, we show the increase in sales during the two month program was completely offset during the following seven to nine months, consistent with previous research. However, we also find the program's fuel efficiency restrictions induced the purchase of more fuel efficient but less expensive vehicles, thereby reducing industry revenues by three billion dollars over the entire nine to eleven month period. This highlights the conflict between the stimulus and environmental objectives of the policy.

    Second, we investigate a related topic. Due to the high political costs of raising the tax rate on gasoline, the United States government combats the negative externalities associated with gasoline consumption by regulating the fuel efficiency of new cars sold. However, the success of these Corporate Average Fuel Economy restrictions depends crucially on whether inducing households to drive more fuel efficient cars causes them to drive more miles, which would offset some or all of the reduction in gasoline consumption. We examine this question by applying a regression discontinuity design to exploit the increase in vehicle fuel efficiency induced among new car buyers in Texas during the Cash for Clunkers program in 2009. While new car buyers whose "clunker" was barely eligible for the subsidy drove a similar number of miles per year prior to the policy and are similar in other ways to barely ineligible new car buyers, they bought significantly more fuel efficient vehicles. However, they did not respond by driving more miles following the program. As a result, the increased fuel economy reduced gasoline consumption proportionally. This suggests that behavioral
    responses do not undermine the effectiveness of fuel efficiency standards.

publication date

  • August 2014