Do Consumers Recognize the Value of Fuel Economy? Evidence from Used Car Prices and Gasoline Price Fluctuations

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)

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The relationship between recent gasoline price fluctuations and transit ridership in major US cities

Journal of Transport Geography ◽

10.1016/j.jtrangeo.2009.04.002 ◽

2010 ◽

Vol 18 (2) ◽

pp. 214-225 ◽

Cited By ~ 41

Author(s):

Bradley W. Lane

Keyword(s):

Gasoline Price ◽

Price Fluctuations ◽

Transit Ridership ◽

The Relationship ◽

Us Cities

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Gas Wars: Retail Gasoline Price Fluctuations

Review of Economics and Statistics ◽

10.2307/2109643 ◽

1993 ◽

Vol 75 (1) ◽

pp. 171 ◽

Cited By ~ 63

Author(s):

Rick Castanias ◽

Herb Johnson

Keyword(s):

Gasoline Price ◽

Price Fluctuations ◽

Retail Gasoline

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Evaluating US Fuel Economy Standards in a Model with Producer and Household Heterogeneity

American Economic Journal Economic Policy ◽

10.1257/pol.5.2.148 ◽

2013 ◽

Vol 5 (2) ◽

pp. 148-187 ◽

Cited By ~ 84

Author(s):

Mark R Jacobsen

Keyword(s):

Low Income ◽

Fuel Economy ◽

Welfare Cost ◽

Corporate Average Fuel Economy ◽

Household Decision ◽

Gasoline Tax ◽

Car Market ◽

The Us ◽

Used Car ◽

Household Heterogeneity

This paper employs an empirically estimated model to study the equilibrium effects of an increase in the US corporate average fuel economy (CAFE) standards. I identify and model heterogeneity across firms and find that the profit impacts of CAFE fall almost entirely on domestic producers. The welfare analyses consider the simultaneous household decision of vehicle and miles traveled, allowing direct comparison with a gasoline tax. Finally, I consider dynamic impacts in the used car market. I find these comprise nearly half the gross welfare cost of CAFE and fall disproportionately on low-income households. Contrary to previous results, the overall welfare costs are regressive. (JEL H24, L51, L62)

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