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American Economic Journal: Economic Policy: Vol. 4 No. 4 (November 2012)

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Clunkers or Junkers? Adverse Selection in a Vehicle Retirement Program

Article Citation

Sandler, Ryan. 2012. "Clunkers or Junkers? Adverse Selection in a Vehicle Retirement Program." American Economic Journal: Economic Policy, 4(4): 253-81.

DOI: 10.1257/pol.4.4.253

Abstract

Vehicle retirement programs have become popular tools of public policy for reducing pollution. The efficacy of these programs is difficult to measure, as it is difficult to tell how much a vehicle would have polluted otherwise. I estimate that counterfactual using data from a long-running local program in California. I utilize the universe of emissions inspections from the California Smog Check Program to construct vehicle usage histories of retired cars and similar vehicles which did not retire early. I find that the program's cost-effectiveness steadily declined over time because of the depreciation of the vehicle fleet, while adverse selection remained a problem throughout. (JEL D82, Q53, Q58, R48)

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Authors

Sandler, Ryan (US Federal Trade Commission)

JEL Classifications

D82: Asymmetric and Private Information; Mechanism Design
Q53: Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
Q58: Environmental Economics: Government Policy
R48: Transportation Systems: Government Pricing and Policy

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