Cash for Corollas: When Stimulus Reduces Spending

43 Pages Posted: 4 Aug 2014

See all articles by Mark Hoekstra

Mark Hoekstra

Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Steven L. Puller

Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Jeremy West

Texas A&M University - Department of Economics

Date Written: July 2014

Abstract

The 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which was experiencing disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show nearly 60 percent 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 $5,000 less. On net, Cash for Clunkers significantly reduced total new vehicle spending over the ten month period.

Suggested Citation

Hoekstra, Mark and Puller, Steven Lawrence and West, Jeremy, Cash for Corollas: When Stimulus Reduces Spending (July 2014). NBER Working Paper No. w20349. Available at SSRN: https://ssrn.com/abstract=2475696

Mark Hoekstra (Contact Author)

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Steven Lawrence Puller

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jeremy West

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

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