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Evaluating the Causal Effects of Cash-for-Clunkers Programs in Selected Countries: Success or Failure?

  • Müller, Andrea
  • Heimeshoff, Ulrich
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    This paper provides empirical evidence that Accelerated Vehicle Programs exhibit a positive influence on car registrations using unique aggregate monthly data for 23 OECD countries from 2000 to 2010. The effect is still traceable if dynamic panel data fixed effects methods are used to address the problem of unobserved heterogeneity and controlling for macroeconomic variables like industrial production, interest rate, unemployment rate and gasoline price. Furthermore our analysis reveals that passenger car sales varied considerably before the car scrappage scheme was put in place to fight the 2009 sales crisis. Compared to a simulated counterfactual situation we find a positive overall effect (until autumn 2010) of the recent Accelerated Vehicle Programs for chosen countries: the United States, South Korea, Germany and the United Kingdom. Simulation results further show that timing and duration of the policies seem much more important for its success than the budget allocated to the program.

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    File URL: http://econstor.eu/bitstream/10419/79802/1/VfS_2013_pid_603.pdf
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    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79802.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:79802
    Contact details of provider: Web page: http://www.socialpolitik.org/
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    1. Anna Alberini & Winston Harrington & Virginia McConnell, 1995. "Determinants of Participation in Accelerated Vehicle-Retirement Programs," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 93-112, Spring.
    2. Robert E. Cumby & John Huizinga, 1990. "Testing The Autocorrelation Structure of Disturbances in Ordinary Least Squares and Instrumental Variables Regressions," NBER Technical Working Papers 0092, National Bureau of Economic Research, Inc.
    3. Alberini, Anna & Harrington, Winston & McConnell, Virginia, 1996. "Estimating an Emissions Supply Function from Accelerated Vehicle Retirement Programs," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 251-65, May.
    4. Li, Shanjun & Linn, Joshua & Spiller, Elisheba, 2013. "Evaluating “Cash-for-Clunkers”: Program effects on auto sales and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 175-193.
    5. Miravete, Eugenio J & Moral Rincón, Maria J, 2009. "Qualitative Effects of Cash-For-Clunkers Programs," CEPR Discussion Papers 7517, C.E.P.R. Discussion Papers.
    6. David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, vol. 3(2), pages 168-177, June.
    7. Baltas, N.C. & Xepapadeas, A., 1999. "Accelerating Vehicle Replacement and Environmental Protection: the Case of Passenger Cars in Greece," Athens University of Economics and Business 108, Athens University of Economics and Business, Department of International and European Economic Studies.
    8. David Haugh & Annabelle Mourougane & Olivier Chatal, 2010. "The Automobile Industry in and Beyond the Crisis," OECD Economics Department Working Papers 745, OECD Publishing.
    9. Adda, Jérôme & Cooper, Russell W., 1997. "Balladurette and jupette: a discrete analysis of scrapping subsidies," CEPREMAP Working Papers (Couverture Orange) 9711, CEPREMAP.
    10. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    11. Kavalec, Chris & Setiawan, Winardi, 1997. "An analysis of accelerated vehicle retirement programs using a discrete choice personal vehicle model," Transport Policy, Elsevier, vol. 4(2), pages 95-107, April.
    12. Degryse, Hans & Kim, Moshe & Ongena, Steven, 2009. "Microeconometrics of Banking Methods, Applications, and Results," OUP Catalogue, Oxford University Press, number 9780195340471, March.
    13. Robert W. Hahn, 1995. "An Economic Analysis of Scrappage," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 222-242, Summer.
    14. Ryan, Lisa & Ferreira, Susana & Convery, Frank, 2009. "The impact of fiscal and other measures on new passenger car sales and CO2 emissions intensity: Evidence from Europe," Energy Economics, Elsevier, vol. 31(3), pages 365-374, May.
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