Scrapping subsidies during the financial crisis: Evidence from Europe
AbstractWe study the effects of the car scrapping subsidies in Europe during the financial crisis. We make use of a rich data set of all car models sold in nine European countries, observed at a monthly level during 2005-2011.We employ a difference-in-differences approach, exploiting the fact that different countries adopted their programs at different points in time. We find that the scrapping schemes played a strong role in stabilizing total car sales in 2009: they prevented a total car sales reduction of 17.4% in countries with schemes targeted to low emission vehicles, and they prevented a 14.8% sales reduction in countries with non-targeted schemes. In contrast, the scrapping schemes only had small environmental benefits: without the schemes, average fuel consumption of new purchased cars would have been only 1.3% higher in countries with targeted schemes and 0.5% higher in countries with non-targeted schemes. We do not find evidence of crowding out due to substitution from non-eligible to eligible cars in countries with targeted schemes. Finally, we identify some competitive and trade effects from the schemes: domestic car producers benefited at the expense of foreign competitors in the countries where the schemes were not targeted. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-079.
Date of creation: 2013
Date of revision:
scrapping subsidies; economic assessment of state aid; financial crisis; automobile market;
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-14 (All new papers)
- NEP-EUR-2013-11-14 (Microeconomic European Issues)
- NEP-TRE-2013-11-14 (Transport Economics)
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