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Impact of the Car Scrapping Scheme on Consumer Behaviour and Aggregate Consumption

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  • Lukáš Mohelský

Abstract

The American financial crisis, which started in 2007, triggered subsequently a global economic decline. To boost the decreasing national economies, many countries introduced various stipulating measures. The automotive industry has been among the numerous fields, which were affected by the decline. The proclaimed importance of this industry led to the introduction of a new economic tool to support the short-term consumption, usually referred to as the car scrapping scheme. This scheme stands for a special incentive to purchase a new car. Usually, the incentive is introduced in the form of a direct financial support or an ex-post tax relief, and is conditioned by scrapping the applicant´s old car. The microeconomic analysis of consumer behaviour proved that the car scrapping scheme can mitigate the maximum decline of the aggregate consumption, thanks to the shift of the consumption line and of the map of the indifference curves. However, the car scrapping scheme has many other impacts, whose research should be elaborated.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2011 (2011)
Issue (Month): 3 ()
Pages: 268-287

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Handle: RePEc:prg:jnlpep:v:2011:y:2011:i:3:id:400:p:268-287

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Keywords: microeconomics; consumer behaviour; car scrapping scheme; automotive industry;

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  1. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Discussion Papers 96-01, University of Copenhagen. Department of Economics.
  2. Sarah Brown & Karl Taylor & Robert McNabb, 2006. "Financial Expectations, Consumption and Saving: A Microeconomic Analysis," Working Papers 2006006, The University of Sheffield, Department of Economics, revised May 2006.
  3. Andolfatto, David, 2008. "Macroeconomic Theory and Policy (2nd Edition)," MPRA Paper 6403, University Library of Munich, Germany.
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