American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Vehicle Scrappage and Gasoline Policy
American Economic Review
(pp. 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)Citation
Jacobsen, Mark R., and Arthur A. van Benthem. 2015. "Vehicle Scrappage and Gasoline Policy." American Economic Review 105 (3): 1312–38. DOI: 10.1257/aer.20130935Additional Materials
JEL Classification
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
- L78 Industry Studies: Primary Products and Construction: Government Policy
- Q35 Hydrocarbon Resources
- Q38 Nonrenewable Resources and Conservation: Government Policy
- Q48 Energy: Government Policy
- Q58 Environmental Economics: Government Policy