Three Essays on the Effects of Government Policies

Abstract

This dissertation studies the role of government policies on environmental and safety externalities generated by the transportation sector. The first two chapters focus on the automobile industry in the United States, which is subject to a series of government-imposed environmental regulations. The third chapter focuses on the alcohol regulations in India, which affect traffic-related safety externalities.

Chapter 1 analyzes the effect of provisions such as deadlines and quotas that policymakers typically use to phase out subsidies for electric vehicles. Such provisions can create dynamic incentives for car manufacturers. Most papers in the literature study the effect of subsidy introduction on market outcomes in static settings, but there is little work that addresses the dynamic effects of subsidy capping designs. This chapter explores these effects in the US electric vehicle market. I develop a structural model of the consumer vehicle choice and manufacturer's pricing decisions in the US automobile industry and estimate it using comprehensive data on new vehicle registrations, prices, characteristics, subsidies, and demographics in 30 states between 2011-2017. Based on the primitives generated from the model, I conduct counterfactual simulations to compare three subsidy capping designs: a market-wide deadline, a per-manufacturer deadline, and a per-manufacturer quota. Counterfactual simulations show that, given government expenditure, a per-manufacturer quota leads to 32% lower EV sales than the policies with deadlines. Moreover, each subsidy capping design influences the sales of conventional vehicles, consumer surplus, manufacturer profits, and liquid fuel consumption differently.

Chapter 2, joint with Ying Fan, studies the effects of separating passenger cars and light-duty trucks in the US Corporate Average Fuel Economy standards. The lower standard for light trucks creates a perverse incentive for manufacturers to redesign large vehicles as light-duty trucks instead of passenger cars to achieve compliance. We exploit a historical change in the car-truck definitions to provide evidence that manufacturers change vehicle characteristics to qualify for favorable regulatory treatment. To quantify the welfare effect of such regulation gaming behavior, we develop and estimate a structural model of the US automobile industry using data between 2001-2016 and conduct a counterfactual simulation where we change ``marginal” truck SUVs to passenger cars for CAFE purposes. We find that designing SUVs as light-duty trucks instead of passenger cars results in higher manufacturer profits, higher consumer surplus, and higher fuel consumption.

Chapter 3 analyzes the effect of alcohol regulations on road traffic accidents, injuries, and fatalities in India. Alcohol-related regulations in India are subject to intense scrutiny, but there is little documentation on the effects of these policies on road safety. In this chapter, I use state-level data on road accidents and the changes in alcohol regulations across states and road types between 2004-2019 to identify the impact of two regulations on road traffic accidents: (1) regulation of demographic access to alcohol through state-wide alcohol ban and minimum legal drinking age and (2) regulation of location where alcohol is sold through sales ban near highways. The results show that a state that moves from an alcohol prohibition to a legal drinking age of 16 experiences roughly ten additional accidents per 10,000 vehicles, on average, compared to other states. Moreover, the roads affected by the highway alcohol ban experience six fewer accidents per 10,000 vehicles compared to other roads. Finally, there is evidence of spillovers of neighboring states' drinking age policies on a state's road safety.