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American Economic Review Vol. 105 No. 3 2015

Vehicle Scrappage and Gasoline Policy

Mark R. Jacobsen1; Arthur A. van Benthem2

1 University of California, San Diego, 9500 Gilman Drive, La Jolla, CA 92093-0508, and NBER (e-mail: ) · 2 the Wharton School, University of Pennsylvania, 1354 Steinberg Hall-Dietrich Hall, 3620 Locust Walk, Philadelphia, PA 19104, and NBER (e-mail: )

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.

DOI
10.1257/aer.20130935
Volume
105
Issue
3
Pages
1312-1338
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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