The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel Economy Standards
Authors:
- 1 May 2018
- journal article
- research article
- Published by MIT Press in Review of Economics and Statistics
- Vol. 100 (2) , 319-336
Abstract
We study “attribute-based regulations,” under which regulatory compliance of a firm, product, or individual depends upon a secondary attribute that is not the intended target of the regulation. We develop a theoretical model of the welfare consequences of attribute basing, including its distortionary costs and potential benefits. We then quantify these welfare consequences using quasi-experimental evidence from weight- based fuel-economy regulations. We use bunching analysis to show that vehicle weight increased in response to regulation. We also leverage a policy change and develop a new method for analyzing “double-notched” policies to compare the costs and benefits of a specific attribute-based policy. JEL: H23, Q48, Q58, L62Keywords
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