Sunday, February 24, 2013

Evaluating “Cash-for-Clunkers”: Program effects on auto sales and the environment

“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.
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Fig. 1. Timeline of the Cash-for-Clunkers program.
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Fig. 3. Monthly new vehicle sales in the United States and Canada from 2007 to 2009. Note: The plots show total monthly sales in logarithm for all, eligible, and ineligible vehicles.
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Fig. 4. Pre-program monthly new vehicle sales after controlling for observables.
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Fig. 5. Sales effect over time using the full sample. Note: The plots show the program effect on vehicle sales from June to December of 2009.
by Shanjun Lia, E-mail the corresponding author, Joshua Linnb, E-mail the corresponding author and Elisheba Spillerb, E-mail the corresponding author  
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 
Available online 20 August 2012; In Press, Corrected Proof  
Keywords: Stimulus; Cash-for-Clunkers; Auto demand; CO2 emissions

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