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Cash for Corollas: When Stimulus Reduces Spending

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  • Hoekstra, Mark
  • Puller, Steven L
  • West, Jeremy

Abstract

The 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which experienced disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show more than half 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 $7,600 less. Thus, we estimate on net the $3 billion program reduced total new vehicle spending by $5 billion. (JEL E32, E62, E65, H24, H31, L62)

Suggested Citation

  • Hoekstra, Mark & Puller, Steven L & West, Jeremy, 2017. "Cash for Corollas: When Stimulus Reduces Spending," Santa Cruz Department of Economics, Working Paper Series qt1bd3d2rm, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt1bd3d2rm
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    More about this item

    Keywords

    Economics; Applied Economics; Affordable and Clean Energy; Applied economics;
    All these keywords.

    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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