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Cash for Corollas: When Stimulus Reduces Spending

Author

Listed:
  • Mark Hoekstra
  • Steven L. Puller
  • Jeremy West
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.

Suggested Citation

  • Mark Hoekstra & Steven L. Puller & Jeremy West, 2014. "Cash for Corollas: When Stimulus Reduces Spending," NBER Working Papers 20349, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20349
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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