Cash for Corollas: When Stimulus Reduces Spending
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Date
2015-04-01
Journal Title
Journal ISSN
Volume Title
Publisher
Private Enterprise Research Center, Texas A&M University
Abstract
The 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which was experiencing disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show nearly 60 percent 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 $5,000 less. On net, Cash for Clunkers significantly reduced total new vehicle spending over the ten month period
Description
Macroeconomics
Keywords
1507, Fiscal Stimulus, Multifaceted policy, Regression discontinuity, Macroeconomics