(NAS Colloquium) Science, Technology and the Economy (1996) / Chapter Skim
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Environmental change and hedonic cost functions for automobiles
Environmental change and hedonic cost functions for automobiles
Pages 77-84
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From page 77... ...
We estimate "hedonic cost functions" that relate product-level costs to their characteristics. Then we examine how this cost surface has changed over time and how these changes relate to changes in gas prices and in emission standard regulations.
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From page 78... ...
Shows plots of emission standards and gas prices against time. may discover that the reasons for the problems in the labor and capital equations require us also to modify the materials equation, so we continue to explore other approaches in our on-going research.
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From page 79... ...
The unit values are the average of the per vehicle price received by the plants for the vehicles assembled by those plants deflated by the gross domestic product deflator. This measure of materials input represents the lion's share of the total cost of the inputs used by these assembly plants; on average, the share of materials in total costs was about 85%, with most of the balance being labor cost.m Material costs per vehicle were fairly constant during the first half of the 1970s, but moved upwards after 1975, with a sharp jump in 1982.
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From page 80... ...
The right-hand-side variables include: the term 1/Q, whose coefficient determines fixed costs; the term J/Q, whose coefficient determines model changeover costs; the product characteristics (the x variables) ; and, in the right-most speci mTotal assembly costs are calculated as the sum of materials costs (as discussed above)
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From page 81... ...
Table 4. Results from the materials equation Thus, the small cost coefficient on catalytic converters is consistent with the small estimate of the change in production costs following the first tightening in emissions requirements found in Table 4, whereas the larger cost effects of the later technologies helps explain Table 4's estimated increase in production costs following the second tightening of the emissions standards in 1980.
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From page 82... ...
, though there was different behavior in different subperiods (the index fell between 1978 and 1980 and grew most rapidly in 1976 and 19774. We would expect this index to increase if either of the firms moved to a different point on a given cost surface, being willing to incur higher production costs for more fuel efficient cars, or if the gas price hike induced technological change that enabled firms to produce more fuel efficient cars at no increase in cost.
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From page 83... ...
When we introduce dummy variables for technology classes we find that the simple catalytic converter technology that was introduced with the first tightening of emission standards did not have a noticeable impact on costs. but the more advanced technologies that were introduced with the second tightening of emissions standards did.
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From page 84... ...
Also, patent applications in patent classes that deal with combustion engines increased dramatically after both increases in gas prices. These latter two facts provide some indication that gas price increases induced technological change, which enabled an increase in the fuel efficiency of new car models with only moderate, if any, increases in production costs.
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