NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Cash for Corollas: When Stimulus Reduces Spending

Mark Hoekstra, Steven L. Puller, Jeremy West

NBER Working Paper No. 20349
Issued in July 2014
NBER Program(s):   EEE   IO   PE

Cash for Clunkers was a 2009 economic stimulus program aimed at increasing new vehicle spending by subsidizing the replacement of older vehicles. Using a regression discontinuity design, we show the increase in sales during the two month program was completely offset during the following seven to nine months, consistent with previous research. However, we also find the program's fuel efficiency restrictions induced households to purchase more fuel efficient but less expensive vehicles, thereby reducing industry revenues by three billion dollars over the entire nine to eleven month period. This highlights the conflict between the stimulus and environmental objectives of the policy.

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Document Object Identifier (DOI): 10.3386/w20349

 
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