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)
Jacobsen, Mark R.
"Evaluating US Fuel Economy Standards in a Model with Producer and Household Heterogeneity."
American Economic Journal: Economic Policy,
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Economics of Regulation
Automobiles; Other Transportation Equipment