“Cash-for-Clunkers” was a $3 billion program that attempted to stimulate the U.S. economy and improve the environment by encouraging consumers to retire older vehicles and purchase fuel-efficient new vehicles. We investigate the effects of this program on new vehicle sales and the environment. 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. Our results cannot reject the hypothesis that there is little or no gain in sales beyond 2009. The program will reduce CO2 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.
- by Shanjun Lia, , Joshua Linnb, and Elisheba Spillerb,
- a Dyson School of Applied Economics and Management at Cornell University, 424 Warren Hall, Ithaca, NY 14853, USA
- b Resources for the Future (RFF), 1616P Street NW, Washington, DC 20036, USA
- Journal of Environmental Economics and Management
- via Elsevier Science Direct www.ScienceDirect.com
- Available online 20 August 2012; In Press, Corrected Proof
- Keywords: Stimulus; Cash-for-Clunkers; Auto demand; CO2 emissions