Automobiles on Steroids: Product Attribute Trade-Offs and Technological Progress in the Automobile Sector

By Christopher R. Knittel. 2011

318 citations recorded by the source corpus.

New car fleet fuel economy, weight and engine power have changed drastically since 1980. These changes represent both movements along and shifts in the "fuel economy/weight/engine power production possibilities frontier". This paper estimates the technological progress that has occurred since 1980 and the trade-offs that manufacturers and consumers face when choosing between fuel economy, weight and engine power characteristics. The results suggest that if weight, horsepower and torque were held at their 1980 levels, fuel economy for both passenger cars and light trucks could have increased by nearly 50 percent from 1980 to 2006; this is in stark contrast to the 15 percent by which fuel economy actually increased. I also find that once technological progress is considered, meeting the CAFE standards adopted in 2007 will require halting the observed increases in weight and engine power characteristics, but little more; in contrast, the standards recently announced by the new administration, while certainly attainable, require non-trivial "downsizing". I also investigate the relative efficiencies of manufacturers. I find that US manufacturers tend to be above the median in terms of their passenger vehicle fuel efficiency conditional on weight and engine power, and are among the top for light duty trucks; Honda is the most efficient manufacturer for both passenger cars, while Volvo is the most efficient manufacturer of light duty trucks. However, I also find that over time, US manufacturers' relative efficiency in both passenger cars and light trucks has degraded. These results may provide insight into their current financial troubles.

Subfields: Economics and Econometrics, Marketing, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/c903a69e14d7af8434342f93ff1fe2dd7e5591d9

How researchers see this paper

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In Economics and Econometrics

1. Antoine Dechezleprêtre
2. David Popp
3. Ralf Martin
4. John Van Reenen
5. Philippe Aghion
6. David Hémous
7. Daron Acemoglu
8. A. V. Benthem

In Marketing

1. A. V. Benthem
2. David Greene
3. David Popp
4. Philippe Aghion
5. Mark Jacobsen
6. V. Ramey
7. John Van Reenen
8. Antoine Dechezleprêtre

In Renewable Energy, Sustainability and the Environment

1. Antoine Dechezleprêtre
2. A. V. Benthem
3. Mark Jacobsen
4. Philippe Aghion
5. John Van Reenen
6. David Greene
7. David Popp
8. Ralf Martin

Citations in the corpus

• Environmental Policy and Innovation: A Decade of Research (2019, background): “While each of these papers use patents as a measure of technological progress, Knittel (2011) uses the relationship between fuel efficiency and vehicle characteristics to infer rates of technological progress.”
• Gasoline Prices, Fuel Economy, and the Energy Paradox (2014, unknown): “Even within a generation, however, there can be some variation in observable characteristics (Knittel, 2011, figure 1).”
• Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry (2012, background): “5%, while horsepower increased by 80% (Knittel, 2011).”
• How Consumers Value Fuel Economy: A Literature Review (2010, methodology): “Indeed, the two manufacturers with the highest fuel economy given the mass and power of their passenger cars are Toyota and Honda, manufacturers also having among the highest reputations for quality (Knittel, 2009).”
• The Environmental Effect of Green Taxation: the Case of the French "Bonus/Malus" (2014, background): “Klier & Linn (2010) observe for instance medium-run firm responses to high gasoline prices (see also Knittel, 2011).”
• Vehicle Scrappage and Gasoline Policy (2013, background): “1 Effect of Gasoline Price on Used Car Prices We first report the equilibrium impact of gasoline price on used vehicle prices following the specification in Busse, Knittel, and Zettelmeyer (2013). Our results match theirs closely.”
• Reducing Petroleum Consumption from Transportation (2012, unknown): “For example, Kleit (2002) investigates the long-run e↵ects of a 3 miles-per-gallon increase in the CAFE standard and the gasoline tax that would achieve the same reduction in consumption of gasoline.”
• Oil, Automobiles, and the U.S. Economy: How Much Have Things Really Changed? (2011, background): “…demand shifted away from cars and toward larger SUVs.18 Studies that more carefully take into account vehicle size and engine horsepower, such as Knittel (2009), conclude that the technological frontier of fuel-economy/vehicle-weight/enginepower possibilities continued to expand over this…”