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Abstract

Corporate Average Fuel Economy (CAFE) standards have historically been set equal across all manufacturer fleets of the same type. Concerns about varying costs across firms and safety implications of standards that are set homogeneously across firms and models resulted in a policy shift towards footprint-based standards. Under this type of standard, individual car models face targets based on the size of the area between the wheelbase and wheel track, so that larger models face less stringent standards, and manufacturers who make, on average, larger cars will face a lighter fleet standard. Theoretical models have shown that this type of policy creates an incentive for firms to effectively lighten the standard they face, but no purely empirical study has tested this theoretical conclusion. I use a series of difference-in-difference estimations to test whether firms respond to the policy by increasing the footprint of individual models. I find some statistically significant evidence of an increase in footprint size in response to the policy when the treatment effect is assumed to increase by market share.

Publication Date

5-2015

Document Type

Article