NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Car Notches: Strategic Automaker Responses to Fuel Economy Policy

James M. Sallee, Joel Slemrod

NBER Working Paper No. 16604
Issued in December 2010
NBER Program(s):   EEE   PE

Notches --- where small changes in behavior lead to large changes in a tax or subsidy --- figure prominently in many policies, but have been rarely examined by economists. In this paper, we analyze a class of notches associated with policies aimed at improving vehicle fuel economy. We provide several pieces of evidence showing that automakers respond to notches in fuel economy policy by precisely manipulating fuel economy ratings so as to just qualify for more favorable treatment. We then describe the welfare consequences of this behavior and derive a welfare summary statistic applicable to many contexts.

download in pdf format
   (1312 K)

email paper

This paper is available as PDF (1312 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Sallee, James M. & Slemrod, Joel, 2012. "Car notches: Strategic automaker responses to fuel economy policy," Journal of Public Economics, Elsevier, vol. 96(11), pages 981-999.

Users who downloaded this paper also downloaded these:
Zettelmeyer, Scott Morton, and Silva-Risso w12177 Scarcity Rents in Car Retailing: Evidence from Inventory Fluctuations at Dealerships
Sallee w16466 The Taxation of Fuel Economy
Kahn and Mansur w16538 How Do Energy Prices, and Labor and Environmental Regulations Affect Local Manufacturing Employment Dynamics? A Regression Discontinuity Approach
Anderson, Fischer, Parry, and Sallee w16370 Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives
Scott Morton, Zettelmeyer, and Risso w7961 Internet Car Retailing
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us