12:00
Welfare Effects of Distortionary Tax Incentives under Preference Heterogeneity: An Application to Employer-provided Electric Cars
Alexandros Dimitropoulos (VU University Amsterdam)
Field: spatatial economics (transport / environmental economics)
This paper presents an approach for the estimation of welfare effects of tax policy changes under heterogeneity in consumer preferences. The approach is applied to evaluate the welfare effects of current tax advantages for electric vehicles supplied as fringe benefits by employers. Drawing on stated preferences of Dutch company car drivers, we assess the short-run welfare effects of changes in the taxation of the private use of these vehicles. We find that the welfare gain of a marginal increase in the taxation of electric company cars is substantial and even outweighs the marginal tax revenue raised.
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12:30
The Role of Insurance Premiums in Internalization of Road Accident Externalities
Maria Dementyeva (VU University Amsterdam)
Field: spatial economics
In this work we study the regulation of road safety via analysis of accident externalities, when insurance companies have market power, and can influence road users’ strategy choices in terms of mileage, investment in car safety, and speed. The government has control over insurance providers and the drivers.
Our model describes a two-stage game between car insurance providers and road users. We obtain marginal conditions of the first- and second-best solutions. In our model we assume that companies can influence drivers’ behavior via insurance programs. Government then can impose taxes on companies and/or road users and/or other regulations. We consider social monopoly, and competitive market of the firms playing Nash in Cournot fashion.
For each type of market structure, the insurance schedule consists of an insurance premium, and marginal dependence of that premium on speed and driver’s own safety technology. In the monopolistic market, the desires of a monopolist with respect to safety technology is identical irrespective of whether there is a private profit-maximizing monopoly or a public welfare-maximizing one. However, additional regulations are needed in order to eliminate market failure due to non-socially optimal choice of speed and the level of the insurance premium. In competitive markets, insurance firms do not fully internalize accident externalities their customers impose upon one another, therefore, applying second-best premiums as well as speed and technology control.
