Cash for Corollas: When Stimulus Reduces Spending†

Cash for Corollas: When Stimulus Reduces Spending† AbstractThe 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which experienced disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show more than half of the subsidies went to households who would have purchased during the two-month program anyway; the rest accelerated sales by no more than eight months. Moreover, the program's fuel efficiency restrictions shifted purchases toward vehicles that cost on average $7,600 less. Thus, we estimate on net the $3 billion program reduced total new vehicle spending by $5 billion. (JEL E32, E62, E65, H24, H31, L62) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Applied Economics American Economic Association

Cash for Corollas: When Stimulus Reduces Spending†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
1945-7790
D.O.I.
10.1257/app.20150172
Publisher site
See Article on Publisher Site

Abstract

AbstractThe 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which experienced disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show more than half of the subsidies went to households who would have purchased during the two-month program anyway; the rest accelerated sales by no more than eight months. Moreover, the program's fuel efficiency restrictions shifted purchases toward vehicles that cost on average $7,600 less. Thus, we estimate on net the $3 billion program reduced total new vehicle spending by $5 billion. (JEL E32, E62, E65, H24, H31, L62)

Journal

American Economic Journal: Applied EconomicsAmerican Economic Association

Published: Jul 1, 2017

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