Arik Levinson, Lutz Sager, 05 January 2021

Minimum standards for automobile fuel economy were first set in the US in the 1970s, and have since spread to Europe, Asia, and now Latin America. Regulators claim the rules save car buyers money on average, implying a market imperfection or behavioural anomaly. This column presents new evidence that those averages mask enormous variation. While some drivers could likely save money by spending more upfront for efficient cars, many others overspend for efficient cars they rarely use. Demographics, not economics, determine car choices.

Susan Helper, Jennifer Kuan, 20 December 2016

Innovation is often associated with a few visionaries working in new and dynamic industries. In practice, however, critical innovation occurs daily at many points throughout a supply chain. This column uses recent survey data to examine innovation in the US automotive supply chain. Process innovations can have major downstream benefits, and ‘collaborative creativity’ between suppliers and customers is found to be critical in innovation efforts. US automakers should focus on strengthening ties with their suppliers in order to remain competitive.

Keith Head, Thierry Mayer, 10 November 2015

There seems to be a general consensus that the Trans-Pacific Partnership is not a pure trade agreement. This column presents evidence suggesting that for at least one major sector – the auto industry – the agreement will make a huge difference, bringing considerable disruption to the industry but offering sizeable gains for car buyers.

Mark Hoekstra, Steve Puller, Jeremy West, 03 September 2014

‘Cash for Clunkers’ was billed as a stimulus programme that would boost sales to the ailing US auto industry in 2009. This column shows that the design of the programme actually caused it to reduce revenues to the industry it was designed to help. The authors estimate that the entire increase in sales during the programme would have happened anyway in the following eight months. Moreover, since more fuel-efficient cars tend to be less expensive, the fuel economy requirement of the programme incentivised households to buy cheaper cars.

CEPR Policy Research