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Research Seminar
Koichiro Ito
When firms design products for global markets, domestic policies can propagate internationally
by inducing changes in product attributes. We call this phenomenon attribute propagation and
develop a framework to assess its economic significance. Using difference-in-differences analysis
and structural estimation, we find that a fuel-economy subsidy in Japan led to substantial
improvements in fuel economy in the United States. The impact is first-order—most CO2
emissions reductions from the Japanese policy arise through its effects in the United States.
Our findings suggest that conventional economic analysis may understate the global impacts of
many economic policies.
by inducing changes in product attributes. We call this phenomenon attribute propagation and
develop a framework to assess its economic significance. Using difference-in-differences analysis
and structural estimation, we find that a fuel-economy subsidy in Japan led to substantial
improvements in fuel economy in the United States. The impact is first-order—most CO2
emissions reductions from the Japanese policy arise through its effects in the United States.
Our findings suggest that conventional economic analysis may understate the global impacts of
many economic policies.
