Description:

Speaker: Max Pienkny

Title: The Safety Cost of Footprint-Based Fuel-Economy Standards

Abstract: U.S. corporate average fuel economy standards (CAFE) increasingly tie regulatory stringency to a vehicle’s “footprint”—the area between its wheels—granting larger vehicles more lenient fuel economy targets. This paper shows that this design unintentionally encourages automakers to increase vehicle size, with substantial consequences for road safety. I construct model-level measures of upsizing incentives that combine each model’s position on the footprint schedule with changes to the schedule over time, and I exploit variation in these incentives to estimate the causal effect of footprint-based standards on vehicle size. Models facing stronger incentives upsize more, and this expansion contributes disproportionately to motor-vehicle fatalities, generating large negative safety externalities. Moving forward, I propose a structural framework with endogenous vehicle size to quantify the welfare consequences of footprint-based regulation and evaluate alternative policy designs.