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A note on mitigating the adverse scale effects associated with daily driving restrictions

Published online by Cambridge University Press:  24 October 2017

Arthur J. Caplan  and
Man-Keun Kim
Arthur J. Caplan*
Affiliation:
Department of Applied Economics, Utah State University, 4835 Old Main Hill, Logan, Utah 84321, USA
Man-Keun Kim
Affiliation:
Department of Applied Economics, Utah State University, 4835 Old Main Hill, Logan, Utah 84321, USA
*
*Corresponding author. Email: arthur.caplan@usu.edu
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Abstract

This paper investigates the role of additional regulation in mitigating the ‘adverse scale effect’ associated with daily driving restrictions, which has become a popular regulatory tool used to control episodic air pollution internationally, especially in developing countries. We find that although an annual vehicle registration tax reduces the incentive to purchase additional vehicles among households whose sole purpose for doing so is to ‘cheat’ the restriction (i.e., the ‘adverse scale effect’), it does so with an external cost. The cost occurs because households whose purpose for purchasing an additional vehicle is not to cheat the restriction are given the same disincentive with the tax. We show how simple one- and two-stage lotteries can be used to not only discriminate between cheater and non-cheater households (in particular, to avoid providing a disincentive to the latter type of household), but also to provide an even stronger disincentive to the former.

Keywords

Adverse scale effectdaily driving restrictionslotteryvehicle registration taxQ52Q53
Type
Research Article
Information
Environment and Development Economics , Volume 23 , Issue 1 , February 2018 , pp. 63 - 79
Copyright
Copyright © Cambridge University Press 2017 

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