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The Cost Of Greening Stimulus: A Dynamic Analysis Of Vehicle Scrappage Programs

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  • Shanjun Li
  • Youming Liu
  • Chao Wei

Abstract

This article investigates the potential trade‐off between the stimulus and environmental objectives in the context of the U.S. vehicle scrappage program. We develop and estimate a dynamic model of vehicle ownership and conduct a counterfactual analysis comparing the implemented policy with alternative designs. We find the cost of the implemented policy 25% higher in terms of induced sales and 64% higher in terms of induced spending than a policy design without the environmental objective. The findings serve as a caution for green stimulus programs to address both climate change and the economic crisis from the ongoing pandemic.

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  • Shanjun Li & Youming Liu & Chao Wei, 2022. "The Cost Of Greening Stimulus: A Dynamic Analysis Of Vehicle Scrappage Programs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(4), pages 1561-1594, November.
    • Handle: RePEc:wly:iecrev:v:63:y:2022:i:4:p:1561-1594
    DOI: 10.1111/iere.12590
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    References listed on IDEAS

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    2. Fournel, Jean-François, 2023. "Electric Vehicle Subsidies: Cost-Effectiveness and Emission Reductions," TSE Working Papers 23-1465, Toulouse School of Economics (TSE).

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