News from Notch Consulting, Inc.

September 16, 2010

Did Cash for Clunkers Work as Stimulus?

Filed under: Carbon Black, General, insoluble sulfur, Rubber Chemicals, Tires — Notch @ 9:39 am

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.

From a paper by Atif Mian and Amir Sufi, “The Effects of Fiscal Stimulus: Evidence from the 2009 ‘Cash for Clunkers’ Program,” available here.

For my part, I’m not sure what kind of vehicle scrappage program would not, by its very definition, pull purchases forward from the very near future. After all, one can only encourage vehicle trade-ins amongst those already inclined to trade in their vehicles. I do think that the per-vehicle rebates could have been reduced and spread out over a longer period. As it happened, the CFC program created a tsunami of demand over a very short window, jolting the automotive and tire industries from the absolute trough of the recession into overdrive and creating shortages in an industry that had reduced inventories to rock-bottom levels.

Advertisements

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

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

Create a free website or blog at WordPress.com.

%d bloggers like this: