Managing trade in clunkers.
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Date
2020-08-15
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Abstract
Many low-income countries rely on age-based imports restrictions to curb local pollution from motor vehicles. Yet the impact of these policies, unlike that of emission regulations in richer economies, is not well understood. In this paper, we investigate one such import restriction - an environmental tax levied on old vehicles - in the context of Uganda. Using a di erence-in-di erences framework, we estimate the e ect of a stark increase in the levy in 2015 on imports and rst-time registrations. In order distinguish the direct impact of the levy from substitution
between age groups, we structurally estimate the market for \newly" imported vehicles and decompose the overall e ect using counterfactual simulation. We nd that the levy increase resulted in a substantial reduction of targeted vehicle imports, but that rst-time registrations remain una ected as end-users increasingly purchase old inventory from traders. In addition, we nd that the magnitude of the consumer response is decreasing in vehicle age and evidence of substitution towards older vehicles due to the levy. These ndings point to highly progressive levies or outright bans, ideally complemented by domestic regulation, for effective policy aimed at curbing vehicle emissions.
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Forster, F., & Nakyambadde, D. (2020). Managing trade in clunkers.