The incidence of Cash for Clunkers: an analysis of the 2009 car scrappage scheme in Germany
AbstractGovernments all over the world have invested tens of billions of dollars in car scrappage programs to fuel the economy in 2009. We investigate the German case using a unique micro transaction dataset covering the years 2007 to 2010. Our focus is on the incidence of the subsidy, i.e., we ask how much of the € 2,500 buyer subsidy is captured by the supply-side through an increase in selling prices. Using regression analysis, we find that average prices in fact decreased for subsidized buyers in comparison to non-subsidized ones, suggesting that eventually subsidized customers benefitted by more than the subsidy amount. However, the incidence was heterogeneous across price segments. Subsidized buyers of cheap cars paid more than comparable buyers who did not receive the subsidy, e.g. for cars of € 12,000 car dealers reaped about 8% of the scrappage prime. The opposite was true for more expensive cars, e.g. subsidized buyers of cars of € 32,000 were granted an extra discount of about € 1,100. For cars priced about € 18,000, we find no price discrimination, i.e., in this price segment consumers fully captured the transfer. Our results can be explained by optimizing behavior on the supply-side both in the lower and upper price segments. The results are extremely robust to extensive sensitivity checks.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 068.
Date of creation: Apr 2012
Date of revision:
Cash-for-Clunkers; scrappage scheme; incidence; subsidy; pricing;
Find related papers by JEL classification:
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frank Verboven, 2002. "Quality-Based Price Discrimination and Tax Incidence: Evidence from Gasoline and Diesel Cars," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 275-297, Summer.
- Raj Chetty & Adam Looney & Kory Kroft, 2007.
"Salience and Taxation: Theory and Evidence,"
NBER Working Papers
13330, National Bureau of Economic Research, Inc.
- Robert W. Hahn, 1995. "An Economic Analysis of Scrappage," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 222-242, Summer.
- Jesse Rothstein, 2010.
"Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence,"
American Economic Journal: Economic Policy,
American Economic Association, vol. 2(1), pages 177-208, February.
- Jesse Rothstein, 2009. "Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence," Working Papers 1160, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Esteban Susanna, 2007. "Effective Scrappage Subsidies," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-32, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).
If references are entirely missing, you can add them using this form.