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The Black Market for Beijing License Plates
... Three different rationing mechanisms are used to allocate the quota: a lottery (Beijing), an auction (Shanghai), or a hybrid of both auction and lottery (all other cities with a quota system). Daljord et al. (2020) suggested that a black market may exist in some cities with a random quota rationing mechanism, and some consumers still have to pay for quotas in such cities. For example, the authors used the data for Beijing to estimate the lower bound of the black market size and found that at least 11% of the quota of license plates is illegally traded. ...
... Lastly, in cities with a VQS, consumers may pay extra costs to get the quota through an unofficial channel. Daljord et al. (2020) suggests that the black market for quota exists in Beijing. We construct two variables to measure the costs of unofficial quota transactions for ICEVs and EVs respectively. ...
We employ a structural model and counterfactual analysis to identify the impact of subsidies on the Chinese electric vehicle (EV) sales and examine their welfare effects. Our findings suggest that subsidies are effective in promoting the diffusion of domestic EVs, but may adversely affect technological advancement. When the subsidies on domestic EVs are reduced, the welfare on domestic EV consumers and producers decreases. However, the reduction in government spending on EV subsidies outweighs this private welfare loss. Thus, the overall welfare increases. Subsidies cannot be justified from the perspective of reducing externalities because they increase rather than decrease pollution. Abstract We employ a structural model and counterfactual analysis to identify the impact of subsidies on the Chinese electric vehicle (EV) sales and examine their welfare effects. Our findings suggest that subsidies are effective in promoting the diffusion of domestic EVs, but may adversely affect technological advancement. When the subsidies on domestic EVs are reduced, the welfare on domestic EV consumers and producers decreases. However, the reduction in government spending on EV subsidies outweighs this private welfare loss. Thus, the overall welfare increases. Subsidies cannot be justified from the perspective of reducing externalities because they increase rather than decrease pollution.
In the context of Beijing’s license plate lottery policy, we investigate the role of habit, induced by a long wait before winning the lottery, in shaping lottery participants’ choices of commuting mode. Based on individual-level surveys and econometric models, we find that after waiting for 26 months, which is the average queue time in Beijing’s license plate lottery, the probability of winners switching their commuting method to driving is reduced by 16%. This behavioral change has reduced Beijing’s annual vehicle mileage by 8.48 million kilometers and avoided 2,000 tons of CO2 emissions per year. The annual social welfare improvement is 7.21 million yuan (approximately $1.05 million). These findings shed light on the serendipity of vehicle ownership restrictions in shaping citizens’ non-driving commuting modes and call for multifaceted ex-post assessments of transport policies.
Rationing mechanisms are widely used to allocate scarce resources caused by policy intervention. The effect of rationing on equilibrium usually depends on the rationing mechanism. However, stylized facts in the Chinese passenger vehicle market suggest that the quota on license plates shifts vehicle demand to the high-price end, regardless of whether rationing occurs through an auction or a lottery. This study provides a unified theoretical explanation and an empirical analysis for this finding. When the quota allocation process incurs opportunity costs, only the consumers with a high willingness-to-pay participate in the process, which shifts sales distribution to the high-price end.
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