@article{2ce1723abdf04a5da47caa6a3644352f,
title = "Do regulatory loopholes distort technical change? Evidence from new vehicle launches under the Japanese fuel economy regulation",
abstract = "Environmental regulation often creates regulatory loopholes that are not ideal in first-best settings. Such loopholes affect the marginal costs of alternative compliance strategies, leading to distortion in firm's compliance choice. We quantify the unintended effect of such loopholes on technical change in the Japanese automobile industry, using variant-level data on new vehicle launches. We employ a triple difference strategy, exploiting the two-fold treatment-control structures within each product segment, due to regulation-induced variations in the Japanese fuel economy standards over time. Our results indicate that regulation-induced differences in technical trade-offs have induced a distortion not only in product attributes but also in technical progress in fuel economy technology.",
keywords = "Automobile, Energy policy, Fuel economy regulation, Ratchet effect, Regulatory loopholes, Technical change, Technology policy, Triple difference",
author = "Yoshifumi Konishi and Shunsuke Managi",
note = "Funding Information: Our special thanks go to Kong Joo Shin who provided valuable assistance in preparing the data for this manuscript. We also thank two anonymous reviewers, Hendrik Wolff (the co-editor), Werner Antweiler, Brian Copeland, Corbett Grainger, Sumeet Gulati, Tomohiko Inui, Daiji Kawaguchi, Carol McAusland, Hikaru Ogawa, Hiroshi Ohashi, and other seminar participants at the University of British Columbia, the University of Tokyo, the National Institute of Environmental Studies (Japan), the National Graduate Institute for Policy Studies, and the Research Institute of Economy, Trade, and Industry (Japan) for their helpful comments. The study was in part supported by the financial support from Japan Society for the Promotion of Science (JSPS), Grant-in-aid for Scientific Research (Grant number: 18K01562 ). This is a substantially improved version of the July 2019 draft. Funding Information: Our special thanks go to Kong Joo Shin who provided valuable assistance in preparing the data for this manuscript. We also thank two anonymous reviewers, Hendrik Wolff (the co-editor), Werner Antweiler, Brian Copeland, Corbett Grainger, Sumeet Gulati, Tomohiko Inui, Daiji Kawaguchi, Carol McAusland, Hikaru Ogawa, Hiroshi Ohashi, and other seminar participants at the University of British Columbia, the University of Tokyo, the National Institute of Environmental Studies (Japan), the National Graduate Institute for Policy Studies, and the Research Institute of Economy, Trade, and Industry (Japan) for their helpful comments. The study was in part supported by the financial support from Japan Society for the Promotion of Science (JSPS), Grant-in-aid for Scientific Research (Grant number: 18K01562). This is a substantially improved version of the July 2019 draft. Publisher Copyright: {\textcopyright} 2020 The Authors",
year = "2020",
month = nov,
doi = "10.1016/j.jeem.2020.102377",
language = "English",
volume = "104",
journal = "Journal of Environmental Economics and Management",
issn = "0095-0696",
publisher = "Academic Press Inc.",
}
