Consumer's Surplus with a Racial Apology? Black Relative to Non-Black Inequality in the Welfare Gains of Fuel-Efficient Cars and Trucks

Abstract

This paper considers whether race conditions the welfare gains associated with the purchase of cars and trucks that comply with National Highway Traffic Safety Administration Corporate Average Fuel Efficiency Standards. We utilize data from the General Social Survey on respondent stated preferences for the extent to which they value fuel-efficient cars and trucks to estimate the maximum market price they are willing to pay for fuel-efficient cars and trucks. Multinomial and Binary Logit parameter estimates from an inverse demand maximum price valuation specification reveal that relative to non-black Americans, black Americans place less value on fuel-efficient cars and trucks. Our results suggest that federal Corporate Average Fuel Efficiency Standards policy is a source of inegalitarian and racially stratified welfare outcomes as relative to non-black Americans, black Americans gain less consumer's surplus from fuel-efficient cars and trucks.

Keywords

Race Stratification Energy Policy Inequality

Get full access to this article

View all access options for this article.

References

Alesina

, Glaeser

E.L.

, Sacerdote

Why doesn't the United States have a European-Style Welfare State?”.

Brook Pap Econ Act. 2001; 2: 187–277.

Alvarez

R.M.

, Nagler

When politics and models collide: estimating models of multiparty competition.

Am J Polit Sci. 1998; 42: 55–96.

Andrews

The political economy of hope and fear: capitalism and the black condition in America. New York: New York University Press; 1999.

Ayres

Fair driving: gender and race discrimination in retail car negotiations.

Harv Law Rev. 1991; 104: 817–72.

Ayres

Further evidence of discrimination in new car negotiations and estimates of its causes.

Mich Law Rev. 1995; 94: 109–47.

Ayres

, Siegelman

Race and gender discrimination in bargaining for a new car.

Am Econ Rev. 1995; 85: 304–21.

Berkson

Some difficulties of interpretation encountered in the application of the chi-square test.

J Am Stat Assoc. 1938; 33: 536–42.

Bohm

Estimating the demand for public goods: an experiment.

Eur Econ Rev. 1972; 3: 111–30.

Cameron

T.A.

Combining contingent valuation and travel cost data for the valuation of non-market goods.

Land Econ. 1992; 68: 302–17.

10.

Choynowski

“Measuring Willingness to Pay for Electricity”, ERD Technical Note Series No. 3, Asian Development Bank, Manila PH 2002.

11.

Cohen

Statistical power analysis for the behavioral sciences. 2nd ed. Hillsdale: Lawrence Erlbaum Associates; 1988.

12.

Cohen

A power primer.

Psychol Bull. 1992; 112: 155–9.

13.

Cropper

M.L.

, Oates

W.E.

Environmental economics: a survey.

J Econ Lit. 1992; 30: 675–740.

14.

Cunha

, Heckman

J.J.

, Navarro

The identification and economic content of ordered choice models with stochastic threshold.

Int Econ Rev. 2007; 48: 1273–309.

15.

Darity

“Stratification economics: the role of intergroup inequality”.

J Econ Financ. 2005; 29: 144–53.

16.

Delucchi

M.A.

, Murphy

J.J.

How large are tax subsidies to motor-vehicle users in the us?

Transp Policy. 2008; 15: 196–208.

17.

Diamond

The impact of government incentives for hybrid-electric vehicles: evidence for us states.

Energy Policy. 2009; 37: 972–83.

18.

Diewert

W.E.

harberger's welfare indicator and revealed preference theory.

Am Econ Rev. 1976; 66: 143–52.

19.

Dow

J.K.

, Endersby

J.W.

Multinomial probit and multinomial logit: a comparison of choice models for voting research.

Elect Stud. 2004; 23: 107–22.

20.

Erdem

, Senturk

, Simsek

Identifying the factors affecting the willingness to pay for fuel-efficient vehicles in Turkey: a case of hybrids.

Energy Policy. 2010; 38: 3038–43.

21.

Goldberg

P.K.

Dealer price discrimination in new car purchases: evidence from the consumer expenditure survey.

J Polit Econ. 1996; 104: 622–54.

22.

Goldberg

P.K.

The effects of the corporate average fuel efficiency standards in the US.

J Ind Econ. 1998; 46: 1–33.

23.

Harberger

A.C.

Three basic postulates for applied welfare economics.

J Econ Lit. 1971; 9: 785–97.

24.

Johnson

D.H.

Statistical sirens: the allure of nonparametrics.

Ecology. 1995; 76: 1998–2000.

25.

Keane

M.P.

A note on identification in the multinomial probit model.

J Bus Econ Stat. 1992; 10: 193–200.

26.

Kishi

, Satoh

Evaluation of willingness to buy a low-pollution car in Japan.

J East Asian Soc Transp Stud. 2005; 6: 3121–34.

27.

Loubert

Discrimination in education financing.

Rev Black Polit Econ. 2005; 32: 17–27.

28.

Ludwiszewski

R.B.

, Haake

C.H.

Cars, carbon, and climate change.

Northwest Univ Law Rev. 2008; 102: 665–94.

29.

McKelvey

R.D.

, Zavoina

A statistical model for the analysis of ordinal level dependent variables.

J Math Sociol. 1975; 4: 103–20.

30.

McKibbon

W.J.

, Wilcoxen

P.J.

The role of economics in climate change policy.

J Econ Perspect. 2002; 16: 107–29.

31.

Morton

F.S.

, Zettelmeyer

, Silvo-Risso

Consumer information and discrimination: does the internet affect the pricing of new cars to women and minorities?

Quant Mark Econ. 2003; 1: 65–92.

32.

Murphy

J.J.

, Allen

G.P.

, Stevens

T.H.

, Weatherhead

A meta-analysis of hypothetical bias in stated preference valuation.

Environ Resour Econ. 2005; 30: 313–25.

33.

Nunnally

J.C.

The place of statistics in psychology.

Educ Psychol Meas. 1960; 20: 641–50.

34.

Parry

I.W.H.

, Walls

, Harrington

Automobile externalities and policies.

J Econ Lit. 2007; 45: 373–99.

35.

Portney

Paul R.

, Ian

W.H.

, Parry

Howard

, Gruenspecht

, and Harrington

Winston

. 2003. “The Economics of Fuel Economy Standards”, Discussion Paper 03-44, Resources for the Future, Washington, DC.

36.

Potoglou

, Kanaroglou

P.S.

Household demand and willingness to pay for clean vehicles.

Transp Res Part D: Transp Environ. 2007; 12: 264–74.

37.

Prescott

E.C.

, Visscher

Sequential location among firms with foresight.

Bell J Econ. 1977; 8: 378–93.

38.

Price

G.N.

Hurricane Katrina: was there a political economy of death?

Rev Black Polit Econ. 2008; 35: 163–80.

39.

Price

G.N.

, Darity

W.A.

The economics of race and eugenic sterilization in North Carolina: 1958–1968.

Econ Hum Biol. 2010; 8: 261–72.

40.

Rawls

A theory of justice. Cambridge: Harvard University Press; 1971.

41.

Rogerson

W.P.

Aggregate expected consumer surplus as a welfare index with an application to price stabilization.

Econometrica. 1980; 48: 423–36.

42.

Savage

I.R.

Nonparametric statistics.

J Am Stat Assoc. 1957; 52: 331–44.

43.

Schlee

E.E.

Expected consumer's surplus as an approximate welfare measure.

Economic Theory. 2008; 34: 127–55.

44.

Solon

Gary

, Steven

Haider, an Jeffrey Wooldridge. 2013. “What are We Weighting For?” National Bureau of Economic Research Working Paper No. 18859, Cambridge, MA.

45.

Spash

C.L.

, Hanley

Preferences, information and biodiversity preservation.

Ecol Econ. 1995; 12: 191–208.

46.

Stern

The economics of climate change: the stern review. Cambridge: Cambridge University Press; 2007.

47.

Stewart

James B.

“Economics, Stratification”, in Darity

William A.

Jr. (ed.) International Encyclopedia of the Social Sciences, pp. 530–531, Macmillan Reference, Farmington Hills, MI; 2008.

48.

Train

Qualitative choice analysis: theory econometrics, and an application to automobile demand. Cambridge: MIT Press; 1986.

49.

Turnovsky

, Shalit

, Schmitz

Consumer's surplus, price instability, and consumer welfare.

Econometrica. 1980; 48: 135–52.

50.

West

, Roberton

II . The cost of reducing gasoline consumption. Am Econ Rev. 2005; 95: 294–9.

51.

Willig

R.D.

Consumer's surplus without apology: reply.

Am Econ Rev. 1976; 66: 589–97.

52.

Willig

R.D.

Consumer's surplus without apology: reply.

Am Econ Rev. 1979; 69: 467–74.