Evaluating 'Cash-for-Clunkers': Program Effect on Auto Sales and the Environment

Resources for the Future Discussion Paper No. 10-39

39 Pages Posted: 4 Aug 2010 Last revised: 29 Sep 2011

See all articles by Shanjun Li

Shanjun Li

Cornell University - School of Applied Economics and Management

Joshua Linn

Resources for the Future

Elisheba Spiller

Environmental Defense Fund

Multiple version iconThere are 2 versions of this paper

Date Written: August 4, 2010

Abstract

“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 more 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 the program increased new vehicle sales by about 0.36 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 suggest no gain in sales beyond 2009 and hence no meaningful stimulus to the economy. In addition, the program will reduce CO2 emissions by only 9 to 28.4 million tons, implying a cost per ton ranging from $91 to $288 even after accounting for reduced criteria pollutants.

Keywords: CARS Program, Automobiles, Employment, Gasoline Consumption, Carbon Dioxide Emissions

JEL Classification: Q50, H23, L62

Suggested Citation

Li, Shanjun and Linn, Joshua and Spiller, Elisheba, Evaluating 'Cash-for-Clunkers': Program Effect on Auto Sales and the Environment (August 4, 2010). Resources for the Future Discussion Paper No. 10-39, Available at SSRN: https://ssrn.com/abstract=1653386 or http://dx.doi.org/10.2139/ssrn.1653386

Shanjun Li

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Joshua Linn (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Elisheba Spiller

Environmental Defense Fund ( email )

257 Park Avenue South
New York, NY 10010
United States

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