Vehicle Miles (Not) Traveled: Why Fuel Economy Requirements Don't Increase Household Driving / Jeremy West, Mark Hoekstra, Jonathan Meer, Steven L. Puller.

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West, Jeremy

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w21194.Publication details: Cambridge, Mass. National Bureau of Economic Research 2015.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: A major concern with addressing the negative externalities of gasoline consumption by regulating fuel economy, rather than increasing fuel taxes, is that households respond by driving more. This paper exploits a discrete threshold in the eligibility for Cash for Clunkers to show that fuel economy restrictions lead households to purchase vehicles that have lower cost-per-mile, but are also smaller and lower-performance. Whereas the former effect can increase driving, the latter effect can reduce it. Results indicate these households do not drive more, suggesting that behavioral responses do not necessarily undermine the effectiveness of fuel economy restrictions at reducing gasoline consumption.

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May 2015.

A major concern with addressing the negative externalities of gasoline consumption by regulating fuel economy, rather than increasing fuel taxes, is that households respond by driving more. This paper exploits a discrete threshold in the eligibility for Cash for Clunkers to show that fuel economy restrictions lead households to purchase vehicles that have lower cost-per-mile, but are also smaller and lower-performance. Whereas the former effect can increase driving, the latter effect can reduce it. Results indicate these households do not drive more, suggesting that behavioral responses do not necessarily undermine the effectiveness of fuel economy restrictions at reducing gasoline consumption.