![]() We provide some evidence supporting these assumptions in Section 3.3. The two main identifying assumptions are that the program did not affect the Canadian vehicle market and that the differential effect of the 2008–2009 recession across the two countries' vehicle markets did not vary over the months in 2009. market: in both countries in recent years before the recession, about 13–14 percent of households annually purchased a new vehicle characteristics of vehicles sold are similar and pre-program time trends are similar. Second, the Canadian auto market is probably the most similar to the U.S. First, Canada did not have a similar program, while nearly a dozen European countries did in 20. We use Canada as the control group based on two observations as well as some statistical evidence. market constitutes the treatment group in the analysis. ![]() The basis for these evaluations is the difference-in-differences (DID) analysis in a vehicle demand framework based on monthly sales of new vehicles by model from 2007 to 2009. ![]() Our cost-effectiveness analysis permits a comparison across these different programs. gasoline consumption and CO 2 emissions such as tax credits for ethanol blending and income tax incentives for purchasing hybrid vehicles. There exist many federal subsidy programs aiming to reduce U.S. Second, we evaluate the program's cost-effectiveness in reducing gasoline consumption and carbon dioxide (CO 2) emissions by comparing total gasoline consumption as well as emissions of CO 2 and criteria pollutants with and without the program. ![]() Because Cash for Clunkers was promoted for stimulus and environmental reasons, we focus on two types of changes in consumer behavior caused by the program: switching from purchasing low fuel-efficiency to high fuel-efficiency vehicles, and shifting the purchase time to take advantage of the program's incentives. Furthermore, we are interested in analyzing whether the program affected the fuel economy distribution of new vehicle sales. Many observers of the program were concerned that it would primarily pull demand from adjacent months, thus providing little short-term stimulus, while others believed that the program would pull demand from several years in the future. First, we examine the program effects on the quantity and composition of new vehicle sales both during the program and in the several months before and after the program. This study estimates the composition of the fleet of vehicles that would have been sold in the absence of the program, permitting a comprehensive evaluation of the program effect on vehicle sales, the environment and economic activity. The large fiscal cost and public enthusiasm for these programs, and their widespread use around the world, raise the question of just how effective they are at meeting their economic and environmental goals. 2 But as a matter of economic theory, it is typically quite difficult to achieve multiple goals with a single policy. program received enormous media attention and many considered the program to be a great success during the program's nearly one-month run, it generated 678,359 eligible transactions and had a cost of $2.85 billion. Many other countries, such as France, the United Kingdom, and Germany, have similar programs, which generally share the same goals: to provide stimulus to the economy by increasing auto sales, and to improve the environment. In the United States, the Cash-for-Clunkers program provided eligible consumers a $3500 or $4500 rebate when trading in an old vehicle and purchasing or leasing a new vehicle. The program will reduce CO 2 emissions by only 9–28.2 million tons based on upper and lower bounds of the estimate of the program effect on sales, implying a cost per ton ranging from $92 to $288 even after accounting for reduced criteria pollutants.Īmid a major recession and growing concerns about the environment, many countries have adopted programs that encourage consumers to trade in their old, inefficient vehicles in exchange for more efficient ones. Our results cannot reject the hypothesis that there is little or no gain in sales beyond 2009. Using Canada as the control group in a difference-in-differences framework, we find that, of the 0.68 million transactions that occurred under the program, the program increased new vehicle sales only by about 0.37 million during July and August of 2009, implying that approximately 45 percent of the spending went to consumers who would have purchased a new vehicle anyway. We investigate the effects of this program on new vehicle sales and the environment. economy and improve the environment by encouraging consumers to retire older vehicles and purchase fuel-efficient new vehicles. “Cash-for-Clunkers” was a $3 billion program that attempted to stimulate the U.S.
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