IDEAS home Printed from https://ideas.repec.org/a/eee/resene/v49y2017icp99-112.html
   My bibliography  Save this article

Safer or cheaper? Traffic safety, vehicle choices and the effect of new corporate average fuel economy standards

Author

Listed:
  • Liu, Yizao

Abstract

The new Corporate Average Fuel Economy (CAFE) Standards increase fuel economy to 54.5 MPG by model year 2025 and determine fuel economy targets based on vehicle sizes. This paper examines the effect of the new CAFE standards on consumer choices and composition of vehicle sales, accounting for the impact of traffic safety. We first formulate and estimate a mixed logit model of consumer demand using micro-level data. Two measures of traffic safety, consumers’ safety concerns and traffic fatalities, are included and interacted with two vehicle characteristics that matter most for traffic safety: weight and size. Further, we conduct simulations of three extreme firm responses to assess the potential impact of the new CAFE standards: lightweighting, paying CAFE fines, and size increase. Simulation results suggest that the sales impact will fall almost entirely on the SUV and light truck segments and on US automakers that use lightweighting. Moreover, consumers in states with more traffic fatalities are the most responsive, shifting away from passenger cars. In addition, the new CAFE standards could result in an increase of 8.1 percent in the share of SUV and light trucks, which will cause as many as 347 more equivalent fatalities on roads each year.

Suggested Citation

  • Liu, Yizao, 2017. "Safer or cheaper? Traffic safety, vehicle choices and the effect of new corporate average fuel economy standards," Resource and Energy Economics, Elsevier, vol. 49(C), pages 99-112.
    • Handle: RePEc:eee:resene:v:49:y:2017:i:c:p:99-112
    DOI: 10.1016/j.reseneeco.2017.04.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0928765516301038
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.reseneeco.2017.04.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Crandall, Robert W & Graham, John D, 1989. "The Effect of Fuel Economy Standards on Automobile Safety," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 97-118, April.
    2. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
    3. Mark R. Jacobsen, 2013. "Evaluating US Fuel Economy Standards in a Model with Producer and Household Heterogeneity," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 148-187, May.
    4. Michael L. Anderson & Maximilian Auffhammer, 2014. "Pounds That Kill: The External Costs of Vehicle Weight," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 535-571.
    5. Ted Gayer, 2004. "The Fatality Risks of Sport-Utility Vehicles, Vans, and Pickups Relative to Cars," Journal of Risk and Uncertainty, Springer, vol. 28(2), pages 103-133, March.
    6. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
    7. Anderson, Michael, 2008. "Safety for whom? The effects of light trucks on traffic fatalities," Journal of Health Economics, Elsevier, vol. 27(4), pages 973-989, July.
    8. Mark R. Jacobsen, 2012. "Fuel Economy and Safety: The Influences of Vehicle Class and Driver Behavior," NBER Working Papers 18012, National Bureau of Economic Research, Inc.
    9. Whitefoot, Kate S. & Skerlos, Steven J., 2012. "Design incentives to increase vehicle size created from the U.S. footprint-based fuel economy standards," Energy Policy, Elsevier, vol. 41(C), pages 402-411.
    10. Shanjun Li, 2012. "Traffic safety and vehicle choice: quantifying the effects of the ‘arms race’ on American roads," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(1), pages 34-62, January.
    11. Thomas Klier & Joshua Linn, 2012. "New‐vehicle characteristics and the cost of the Corporate Average Fuel Economy standard," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 186-213, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hackbarth, André & Madlener, Reinhard, 2018. "Combined Vehicle Type and Fuel Type Choices of Private Households: An Empirical Analysis for Germany," FCN Working Papers 17/2018, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised May 2019.
    2. Sen, Burak & Noori, Mehdi & Tatari, Omer, 2017. "Will Corporate Average Fuel Economy (CAFE) Standard help? Modeling CAFE's impact on market share of electric vehicles," Energy Policy, Elsevier, vol. 109(C), pages 279-287.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tyndall, Justin, 2021. "Pedestrian deaths and large vehicles," Economics of Transportation, Elsevier, vol. 26.
    2. Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.
    3. Greene, David L. & Greenwald, Judith M. & Ciez, Rebecca E., 2020. "U.S. fuel economy and greenhouse gas standards: What have they achieved and what have we learned?," Energy Policy, Elsevier, vol. 146(C).
    4. Michael L. Anderson & Maximilian Auffhammer, 2014. "Pounds That Kill: The External Costs of Vehicle Weight," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 535-571.
    5. Klier, Thomas & Linn, Joshua, 2016. "The effect of vehicle fuel economy standards on technology adoption," Journal of Public Economics, Elsevier, vol. 133(C), pages 41-63.
    6. Tyndall, Justin, 2024. "The effect of front-end vehicle height on pedestrian death risk," Economics of Transportation, Elsevier, vol. 37(C).
    7. Soren T. Anderson & Ian W. H. Parry & James M. Sallee & Carolyn Fischer, 2011. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 89-108, Winter.
    8. Thomas Klier & Joshua Linn, 2011. "Corporate Average Fuel Economy Standards and the Market for New Vehicles," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 445-462, October.
    9. Doremus, Jacqueline & Helfand, Gloria & Liu, Changzheng & Donahue, Marie & Kahan, Ari & Shelby, Michael, 2019. "Simpler is better: Predicting consumer vehicle purchases in the short run," Energy Policy, Elsevier, vol. 129(C), pages 1404-1415.
    10. Nehiba, Cody, 2020. "Taxed to death? Freight truck collision externalities and diesel taxes," Regional Science and Urban Economics, Elsevier, vol. 85(C).
    11. Mark R. Jacobsen, 2012. "Fuel Economy and Safety: The Influences of Vehicle Class and Driver Behavior," NBER Working Papers 18012, National Bureau of Economic Research, Inc.
    12. Klier, Thomas & Linn, Joshua, 2013. "Technological Change, Vehicle Characteristics, and the Opportunity Costs of Fuel Economy Standards," RFF Working Paper Series dp-13-40, Resources for the Future.
    13. Takahiko Kiso, 2019. "Evaluating New Policy Instruments of the Corporate Average Fuel Economy Standards: Footprint, Credit Transferring, and Credit Trading," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(2), pages 445-476, February.
    14. Antonio M. Bento & Mark R. Jacobsen & Christopher R. Knittel & Arthur A. van Benthem, 2020. "Estimating the Costs and Benefits of Fuel-Economy Standards," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 1(1), pages 129-157.
    15. Lauren E. Jones & Nicolas R. Ziebarth, 2017. "U.S. Child Safety Seat Laws: Are they Effective, and Who Complies?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 36(3), pages 584-607, June.
    16. Van Ommeren, Jos & Rietveld, Piet & Zagha Hop, Jack & Sabir, Muhammad, 2013. "Killing kilos in car accidents: Are external costs of car weight internalised?," Economics of Transportation, Elsevier, vol. 2(2), pages 86-93.
    17. Koichiro Ito & James M. Sallee, 2018. "The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel Economy Standards," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 319-336, May.
    18. Choi, Young-Young & Liu, Yizao & Huang, Ling, 2015. "Safer or Cheaper? Household Safety Concerns, Vehicle Choices, and the Costs of Fuel Economy Standards," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205797, Agricultural and Applied Economics Association.
    19. Mathias Reynaert & James M. Sallee, 2021. "Who Benefits When Firms Game Corrective Policies?," American Economic Journal: Economic Policy, American Economic Association, vol. 13(1), pages 372-412, February.
    20. Marz, Waldemar & Goetzke, Frank, 2022. "CAFE in the city — A spatial analysis of fuel economy standards," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:49:y:2017:i:c:p:99-112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505569 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.