Cash for clunkers revisisted: Putting cars into reverse

Posted: August 7, 2014 in economy
Tags: , ,

THE “cash for clunkers” program, introduced during the depths of the downturn, was supposed to be a policy two-for-one. By paying people to trade in their old fuel-guzzling cars for new efficient ones, the scheme was supposed to jump start consumption of durable goods, boost the hard-hit car industry, and improve the fuel efficiency of America’s fleet. The eight-week programme generated an immediate spike in car sales, with almost $3 billion spent on the popular rebates. However, a new paper suggests that the programme may have actually decreased total spending on new motor vehicles creating a net drag on the economy.The study, by Mark Hoekstra, Steven Puller and Jeremy West from Texas A&M University, examined the difference between consumers who were on the border-line of being eligible for the scheme. To qualify as a ‘clunker’, a vehicle needed to achieve less than 18 miles per gallon. Thus by comparing households whose cars were just under this threshold, with those who were just over it, the authors were able to measure the impact of the scheme on consumption patterns. Unsurprisingly, they found that the scheme dramatically increased the car purchases for eligible households over the 8 weeks. But this was largely due to households changing the timing of their purchase. Instead of stimulating new car sales, the spike was mostly attributable to sales that would …

via Economic Crisis http://ift.tt/1skt4ih

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s