Biblioteca

Abstract: Driving restrictions —limits on car use based on the last digit of a car’s license plate— are increasingly popular forms of pollution and congestion control, notwithstanding the literature has shown they typically result in more pollution by moving the fleet composition toward higher-emitting vehicles. We study a design feature present in some restriction programs but much overlooked in the literature: that cleaner cars be exempted from the restriction. Based on evidence from Santiago-Chile’s 1992 program, we find this exemption feature to have a large impact on fleet composition toward cleaner vehicles. We also develop and calibrate for Santiago a vertical-differentiation model of the car market to show that driving restrictions that make optimal use of these exemptions can be way more effective in the fight against local air pollution than alternative instruments such as scrappage subsidies and gasoline taxes.