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Evaluating “Cash-for-Clunkers”: Program Effect on Auto Sales, Jobs, and the Environment

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  • Li, Shanjun

    ()
    (Resources for the Future)

  • Linn, Joshua

    ()
    (Resources for the Future)

  • Spiller, Elisheba

Abstract

We investigate the effects of “Cash for Clunkers”, a $3 billion economic stimulus program, on new vehicle sales, employment, gasoline consumption, 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 0.39 million during July and August of 2009, while the net increase reduced to 0.25 million from June to December. The difference suggests that, as intended, the program significantly shifted sales to July and August from other months. Nevertheless, the program would result in only 8.58 to 28.28 million tons of CO2 emission reductions, implying a cost per ton ranging from $91 to $301 even after accounting for the benefit of the program in reducing criteria pollutants. In addition, the program is estimated to have created 3,676 job-years in the auto assembly and parts industries from June to December of 2009. That effect decreased to 2,050 by May 2010.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-10-39.

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Date of creation: 04 Aug 2010
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Handle: RePEc:rff:dpaper:dp-10-39

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Related research

Keywords: CARS program; automobiles; employment; gasoline consumption; carbon dioxide emissions;

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References

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  1. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
  2. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
  3. Jason Bram & Sydney Ludvigson, 1997. "Does consumer confidence forecast household expenditure?: A sentiment index horse race," Research Paper 9708, Federal Reserve Bank of New York.
  4. Sebastian Galiani & Paul Gertler & Ernesto Schargrodsky, 2002. "Water for Life: The Impact of the Privatization of Water Services on Child Mortality," Working Papers 54, Universidad de San Andres, Departamento de Economia, revised Sep 2005.
  5. Gilbert E. Metcalf, 2008. "Using Tax Expenditures to Achieve Energy Policy Goals," NBER Working Papers 13753, National Bureau of Economic Research, Inc.
  6. Knittel, Christopher R, 2009. "The Implied Cost of Carbon Dioxide under the Cash for Clunkers," Institute of Transportation Studies, Working Paper Series qt95b1c3t0, Institute of Transportation Studies, UC Davis.
  7. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
  8. Abrams Burton A & Parsons George R, 2009. "Is CARS a Clunker?," The Economists' Voice, De Gruyter, vol. 6(8), pages 1-4, August.
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Cited by:
  1. Adam Copeland & James Kahn, 2011. "The production impact of "cash-for-clunkers": implications for stabilization policy," Staff Reports 503, Federal Reserve Bank of New York.
  2. James M. Sallee, 2011. "The Taxation of Fuel Economy," Tax Policy and the Economy, University of Chicago Press, vol. 25(1), pages 1 - 38.

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