Working Paper: NBER ID: w16351
Abstract: A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 "Cash for Clunkers" program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of "clunkers" in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 - only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.
Keywords: Fiscal Stimulus; Cash for Clunkers; Auto Purchases; Economic Impact
JEL Codes: D12; E30; E32; E60; E62; E65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cash for clunkers program (H81) | auto purchases (L62) |
| exposure to clunkers (F18) | auto purchases (L62) |
| cash for clunkers program (H81) | reversal of auto purchases (L81) |
| high exposure cities (R23) | cumulative purchases equal to low exposure cities (R12) |
| cash for clunkers program (H81) | no significant impact on employment (F66) |
| cash for clunkers program (H81) | no significant impact on house prices (R31) |
| cash for clunkers program (H81) | no significant impact on household default rates (G59) |