Cash for Corollas: When Stimulus Reduces Spending
American Economic Journal: Applied Economics
vol. 9,
no. 3, July 2017
(pp. 1-35)
(Complimentary)
Abstract
The 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.Citation
Hoekstra, Mark, Steven L. Puller, and Jeremy West. 2017. "Cash for Corollas: When Stimulus Reduces Spending." American Economic Journal: Applied Economics, 9 (3): 1-35. DOI: 10.1257/app.20150172Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E62 Fiscal Policy
- E65 Studies of Particular Policy Episodes
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H31 Fiscal Policies and Behavior of Economic Agents: Household
- L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
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