Isolating the role of limited knowledge, psychological frictions and policy characteristics is key when evaluating a public program and designing future policies. This paper explores the role of awareness about the presence of fiscal programs in determining their impact on individual choices. Our identification strategy exploits quasi-experimental variation in the introduction of fiscal incentives aimed at promoting the purchase of energy efficient vehicles, and a direct measure of policy awareness at the individual level. We find an important impact of awareness on consumers' vehicle choices, highlighting that limited awareness may represent a critical barrier to the effectiveness of public programs.
Isolating the role of limited knowledge, psychological frictions and policy characteristics is key when evaluating a public program and designing future policies. This paper explores the role of awareness about the presence of fiscal programs in determining their impact on individual choices. Our identification strategy exploits quasi-experimental variation in the introduction of fiscal incentives aimed at promoting the purchase of energy efficient vehicles, and a direct measure of policy awareness at the individual level. We find an important impact of awareness on consumers' vehicle choices, highlighting that limited awareness may represent a critical barrier to the effectiveness of public programs.
Policymakers have been considering vehicle and fuel taxes to reduce transportation greenhouse gas emissions, but there is little evidence on the relative efficacy of these approaches. We examine an annual vehicle registration tax, the Vehicle Excise Duty (VED), which is based on carbon emissions rates. The UK first adopted the system in 2001 and made substantial changes to it in the following years. Using a highly disaggregated dataset of UK monthly registrations and characteristics of new cars, we estimate the effect of the VED on new vehicle registrations and carbon emissions. The VED increased the adoption of low-emissions vehicles and discouraged the purchase of very polluting vehicles, but it had a small effect on aggregate emissions. Using the empirical estimates, we compare the VED with hypothetical taxes that are proportional either to carbon emissions rates or to carbon emissions. The VED reduces total emissions twice as much as the emissions rate tax but by half as much as the emissions tax. Much of the advantage of the emissions tax arises from adjustments in miles driven, rather than the composition of the new car sales.
We evaluate the effect of vehicle recalls on vehicle transactions in the second-hand market. Using a rich dataset of Dutch vehicle registrations, we exploit the quasiexperimental variation in recalls across nearly-identical cars. We find strong heterogeneities across market segments: transactions increased for cars with lower listed price or with defects, and decreased for those with higher price or no defects. Based on our theoretical model, this suggests that recalls increase sorting in low-end markets, yet exacerbate adverse selection in high-end markets. Our results shed light on the effect of information arrival in markets subject to uncertainty and information asymmetries.
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