TY  - JOUR
AU  - Adda,Jerome
AU  - Cooper,Russell
TI  - Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6048
PY  - 1997
Y2  - May 1997
UR  - http://www.nber.org/papers/w6048
L1  - http://www.nber.org/papers/w6048.pdf
N1  - Author contact info:
Jerome Adda
Department of Economics
European University Institute
Villa San Paolo
Via della Piazzuola 43
50133 Firenze 
Tel: +390554685955
E-Mail: j.adda@ucl.ac.uk

Russell Cooper
Department of Economics
The Pennsylvania State University
611 Kern
State College, PA 16802
E-Mail: russellcoop@gmail.com
AB  - This paper studies the effects of subsidies on durable goods markets.  In particular, we study a recent policy in France in which the governments of Balladur and Jupp‚ subsidized the replacement of old cars with new ones.  To study this policy, we construct a dynamic stochastic discrete choice model of car ownership at the household level.  The resulting decision rules and equilibrium conditions are used to estimate, using aggregate data, the underlying parameters of the model.  These policy functions are used to evaluate the short and long run effects of the French policies.  We find that these policies do stimulate the automobile sector in the short run but, through the induced changes in the cross sectional distribution of car ages, create the basis for subsequent low activity.  Further, while these policies increase government revenues in the short run, revenues in the long run are lower relative to a baseline without intervention.
ER  -