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Coase and Car Repair: Who Should Be Responsible for Emissions of Vehicles in Use?

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  • Harrington, Winston
  • McConnell, Virginia D.

Abstract

This paper examines the current assignment of liability for in-use vehicle emissions and suggests some alternative policies that may reduce the cost and increase the effectiveness. We first discuss the cost, performance and incentives under current Inspection and Maintenance (I/M) programs, using the recently implemented Arizona "Enhanced I/M" program as an example. These programs were designed to identify and repair vehicles with malfunctioning emission control systems. Since their inception, however, I/M programs have been plagued by transaction costs that have drastically raised the cost of I/M as well as limited its effectiveness. These transaction costs fall into three categories: emission monitoring, repair avoidance, and non-transferability of emission reductions. We argue that most of these transaction costs can be attributed to the current assignment of liability for I/M to motorists, and we examine the potential for other liability assignments to reduce transaction costs and improve program efficiency. Among the alternative institutional arrangements discussed are greater imposition of liability on manufacturers, emission repair subsidies, repair liability auctions, and vehicle leasing.

Suggested Citation

  • Harrington, Winston & McConnell, Virginia D., 1999. "Coase and Car Repair: Who Should Be Responsible for Emissions of Vehicles in Use?," Discussion Papers 10911, Resources for the Future.
    • Handle: RePEc:ags:rffdps:10911
    DOI: 10.22004/ag.econ.10911
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    References listed on IDEAS

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    1. Leigh, J Paul, 1994. "Non-random Assignment, Vehicle Safety Inspection Laws and Highway Fatalities," Public Choice, Springer, vol. 78(3-4), pages 373-387, March.
    2. James Boyd, 1997. "'Green money' in the bank: firm responses to environmental financial responsibility rules," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(6), pages 491-506.
    3. Harrington, Winston, 1997. "Fuel Economy and Motor Vehicle Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 240-252, July.
    4. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    5. Ando, Amy Whritenour & McConnell, Virginia D. & Harrington, Winston, 1999. "Costs, Emissions Reductions, and Vehicle Repair: Evidence from Arizona," Discussion Papers 10915, Resources for the Future.
    6. Glazer, Amihai & Klein, Daniel & Lave, Charles, 1993. "Clean or a Day: Troubles with California's Smog Check," University of California Transportation Center, Working Papers qt8vm1s03r, University of California Transportation Center.
    7. Thomas N. Hubbard, 1997. "Using Inspection And Maintenance Programs To Regulate Vehicle Emissions," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 52-62, April.
    8. Thomas N. Hubbard, 1998. "An Empirical Examination of Moral Hazard in the Vehicle Inspection Market," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 406-426, Summer.
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    Cited by:

    1. Lamar Pierce & Michael W. Toffel, 2010. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Harvard Business School Working Papers 11-004, Harvard Business School, revised Feb 2012.
    2. Lamar Pierce & Michael W. Toffel, 2013. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Organization Science, INFORMS, vol. 24(5), pages 1558-1584, October.
    3. Rita Pandey, 2006. "Looking beyond inspection and maintenance in reducing pollution from in-use vehicles," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(4), pages 435-457, December.
    4. Harrington, Winston & McConnell, Virginia D. & Ando, Amy Whritenour, 1999. "The Enhanced I/M Program in Arizona: Costs, Effectiveness, and a Comparison with Pre-regulatory Estimates," Discussion Papers 10867, Resources for the Future.
    5. Victor Manuel Bennett & Lamar Pierce & Jason A. Snyder & Michael W. Toffel, 2013. "Customer-Driven Misconduct: How Competition Corrupts Business Practices," Management Science, INFORMS, vol. 59(8), pages 1725-1742, August.
    6. Rita Pandey, 2006. "Looking beyond inspection and maintenance in reducing pollution from in-use vehicles," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(4), pages 435-457, December.
    7. James Boyce, 2003. "Inequality and Environmental Protection," Working Papers wp52, Political Economy Research Institute, University of Massachusetts at Amherst.
    8. Victor Manuel Bennett & Lamar Pierce & Jason A. Snyder & Michael W. Toffel, 2012. "Competition and Illicit Quality," Harvard Business School Working Papers 12-071, Harvard Business School, revised May 2012.

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