Cash For Clunkers Research Articles

Incentivizing Alternative Fuel Vehicle Transactions: Analysis of Cash-for-Clunkers Transactions for New Alternative Fuel Vehicles

Monetary incentives to accelerate the transition of private vehicle fleets to zero emissions promote sustainability in the transportation sector. Clean Cars for America to incentivize transactions for new battery power vehicles is a program in furtherance of sustainable transportation goals in the United States. Unfortunately, data on transactions for new alternative fuel vehicles (AFVs) are scarce so empirical research to explore the costs and/or the benefits of such programs is also scarce. Analysis of transactions for new AFVs from a past, national vehicle retirement program known as Cash for Clunkers provides a rare glimpse into the economic costs and into the environmental benefits of monetary incentives. Analysis of transactions for new AFVs also provides an empirical context for a future, national retirement program such as Clean Cars for America. To that end, the analysis estimates Greenhouse Gas (GHG) emission reduction from a subsample of Cash-for-Clunkers transactions for new AFVs. Overall, incentivizing AFV transactions effectively decreases GHG emissions though regional differences may necessitate dynamic, rather than static, voucher amounts so as to harmonize such differences.

Counting vehicle miles traveled: What can we learn from the NHTS?

• VMTs are essential inputs into a variety of transportation-based models. • The NHTS documents VMTs for thousands of vehicles in the US. • Alternate measures of annual VMTs differ widely, especially for older vehicles. • Alternate measures of annual VMT suggest similar driver responsiveness to fuel prices. An accurate estimate of vehicle miles traveled (VMT) is an essential input into a variety of emissions, climate change, energy and infrastructure-planning models. We examine different measures of annual miles driven from the 2017 National Household Travel Survey (NHTS), which includes a self-reported and an imputed measure of annual VMT for a nationally representative sample of U.S. households. We compute two additional estimates from the odometer reading, and the trip diary information contained in the NHTS, respectively. We compare these four measures of annual VMT, seek to identify low/high mileage segments of the fleet, and examine the quality of the data and their internal validity. The price elasticity of VMT (−0.275 to −0.20) is comparable across these four measures. Quantile regressions indicate that the households with higher driving intensity are less responsive to the fuel cost per mile. As cars get older, the difference between the four VMT measures tends to increase; this implies large discrepancies in the CO 2 emissions that would be saved, for example, when older cars are removed from the fleet, due to natural turnover or when “cash for clunkers” programs are implemented.

Credit Shocks and Equilibrium Dynamics in Consumer Durable Goods Markets

Abstract This article studies equilibrium dynamics in consumer durable goods markets after aggregate credit shocks. We introduce two novel features into a general-equilibrium model of durable consumption with heterogeneous households facing idiosyncratic income risk and borrowing constraints: (1) indivisible durable goods are vertically differentiated in their quality and (2) trade on secondary markets at market-clearing prices, with households endogenously choosing when to trade or scrap their durables. The model highlights a new transmission mechanism for macroeconomic shocks and successfully matches several empirical patterns that we document using data on U.S. car markets around the Great Recession. After a tightening of the borrowing limit, debt-constrained households postpone the decision to scrap and upgrade their low-quality cars, which depresses mid-quality car prices. In turn, this effect reduces wealthy households’ incentives to replace their mid-quality cars with high-quality ones, thereby decreasing new-car sales. We further use our framework to evaluate targeted fiscal stimulus policies such as the Car Allowance Rebate System in 2009 (“Cash for Clunkers”).

Credit Shocks and Equilibrium Dynamics in Consumer Durable Goods Markets

This paper studies the equilibrium dynamics in consumer durable goods markets after aggregate credit shocks. We introduce two novel features into a general-equilibrium model of durable consumption with heterogeneous households facing idiosyncratic income risk and borrowing constraints: (1) different qualities of durable goods trade on secondary markets at market-clearing prices; and (2) households endogenously choose when to trade them or scrap them. The model successfully matches several empirical patterns that we document using data on U.S. car markets around the Great Recession. After a tightening of the borrowing limit, debt-constrained households postpone the decision to scrap and upgrade their low-quality cars, depressing mid-quality car prices. In turn, this effect reduces wealthy households' incentives to replace their mid-quality cars with high-quality ones, thereby decreasing new-car sales. We further use our framework to study the effects of collateral constraints and aggregate income shocks, and to evaluate targeted fiscal stimulus policies such as the Car Allowance Rebate System in 2009 (Cash for Clunkers).

Credit Shocks and Equilibrium Dynamics in Consumer Durable Goods Markets

This paper studies equilibrium dynamics in consumer durable goods markets after aggregate credit shocks. We introduce two novel features into a general-equilibrium model of durable consumption with heterogeneous households facing idiosyncratic income risk and borrowing constraints: (i) indivisible durable goods are vertically differentiated in their quality and (ii) trade on secondary markets at market-clearing prices, with households endogenously choosing when to trade or scrap their durables. The model highlights a new transmission mechanism for macroeconomic shocks and successfully matches several empirical patterns that we document using data on U.S. car markets around the Great Recession. After a tightening of the borrowing limit, debt-constrained households postpone the decision to scrap and upgrade their low-quality cars, which depresses mid-quality car prices. In turn, this effect reduces wealthy households' incentives to replace their mid-quality cars with high-quality ones, thereby decreasing new-car sales. We further use our framework to evaluate targeted fiscal stimulus policies such as the Car Allowance Rebate System in 2009 (``Cash for Clunkers'').

Assessing Temporary Product-Specific Subsidies: A Time Series Intervention Analysis

We propose an analytical framework based on the Kalman Filter to quantify central distortionary effects of product-specific subsidies. In our application, we use time series of foreign and domestic order book levels during and after the temporary installation of a “cash for clunkers” subsidy by the German government in 2009 to assess implied disruptions in the German automobile sector and eleven competing industries of the German manufacturing sector. We find stimulus-effects to be rather mild, some evidence of intertemporal program reversal, and consumers’ windfall gains to clearly come at the expense of other industries.

Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand

This paper evaluates the Car Allowance Rebate System (CARS ) by comparing the vehicle purchases and disposals of households with eligible “clunkers” to those of households with similar but ineligible vehicles. CARS caused roughly 500,000 purchases during the program period. The provision of liquidity, through a rebate usable as a down payment, was critical in generating this large response. Participation was rare among households that owned clunkers with outstanding loans, which required loan repayment. This decline in participation is attributed to households’ preference for lower down payments and distinguished from the effects of income, other indebtedness, and the program subsidy. (JEL E23, E62, G51, H24, H31)

The incidence of Cash for Clunkers: Evidence from the 2009 car scrappage scheme in Germany

This paper investigates the German car scrappage program, focusing on the incidence of the premium. We ask how much of the €2500 ($3500) buyer subsidy is actually captured by the demand side. More precisely, we analyze the program’s impact on different car segments, allowing for heterogeneity in incidence at different points in the vehicle price distribution. Using a unique microtransaction data set, we find that the incidence of the subsidy strongly and significantly varies across price segments. Subsidized buyers of cheap cars paid a little more than comparable buyers who did not receive the subsidy, indicating incidence amounts slightly below 100 %. For more expensive vehicles, subsidized buyers were granted large extra discounts on top of the government premium, translating into incidence amounts considerably greater than 100 %. Taken together, this results in an aggregate incidence amount of up to plus €350 million, suggesting that the positive effect for expensive cars overcompensates the negative effect for small cars.

An assessment of two environmental and economic benefits of ‘Cash for Clunkers’

This research aims to provide a more comprehensive, life cycle accounting of two categories of environmental and economic benefits associated with the $3billion US “Cash for Clunkers” vehicle scrappage program. First, using a life cycle emissions methodology developed in Lenski et al. (2010), we find that about 29,000metric tons of criteria pollutant emissions were avoided, for a benefit of about $23million; avoided carbon dioxide emissions, by comparison, provided a benefit worth $90million. Second, we compare the market value of scrapped vehicles to the rebates provided, calculating the consumer surplus or “gift” to participants to be up to $2billion (about $2000 to $3000 per vehicle). This is significantly more than offered in previous vehicle scrappage programs, and suggests opportunities to get more environmental and economic “bang for the buck.” Finally, these two categories of benefits are found to be heavily concentrated geographically around urban centers. About 2% of US counties (50 counties) received 50% and 30% of the aggregate benefits from avoided criteria pollutant emissions and consumer surplus from the rebates, respectively.

Driving support: workers, PACs, and congressional support of the auto industry

In 2008 and 2009, the House of Representatives directed billions of dollars to the auto industry by passing a bailout and the “cash for clunkers” program. Moving beyond corporate influence via campaign contributions, we demonstrate that the presence of auto workers in a district strongly predicts legislative support for both bills. In addition to this critical legislation, we also analyze over 250 bills on which the auto industry either lobbied or took a public position. We find no patterns relating a district's workers or corporate campaign contributions to these votes on broader legislation where other groups, such as environmental advocates or labor unions, are at the table. Instead, the auto industry garners consistent support only on quasi-private, particularistic legislation. Thus, we contend that on particularistic legislation the presence of workers (not just campaign contributions) drives legislative support; however, when legislators expand the scope of conflict, the influence of a single industry is attentuated by other interests.

Green Stimulus: A Dynamic Discrete Analysis of Vehicle Scrappage Programs

During the Great Recession, many countries adopted stimulus programs designed to achieve two goals: to stimulate economic activity in lagging durable goods sectors, and to protect or enhance environmental quality. Advocates of such programs contend that the environmental benefits are co-benefits of economic stimulus. This paper investigates the potential tradeoff between the stimulus and environmental objectives in the context of the popular U.S. Cash-for-Clunkers (CFC) vehicle scrappage program. We develop and estimate a dynamic discrete choice model of vehicle ownership, and conduct counterfactual analysis comparing the implemented policy with alternative policy designs. Results show that design elements to achieve environmental benefits significantly limit the program's impact on demand stimulus. The cost of demand stimulus after netting out environmental benefits under the program could be 25 percent higher in terms of vehicle sales and 64 percent higher in terms of consumer spending than alternative policy designs without explicitly targeting the environmental objective. Our findings serve as a cautionary tale for green stimulus proposals that aim to address both the economic crisis from the COVID-19 pandemic and climate change.

Using Internet Data to Account for Special Events in Economic Forecasting

Information about special events can improve economic forecasts substantially. However, due to the lack of timely quantitative data about these events, it has been difficult for professional forecasters to utilise such information in their forecasts. This paper investigates whether Internet search data can improve economic predictions in times of special events. An analysis of 'cash for clunkers' programs in four selected countries exemplifies that including search query data into statistical forecasting models improves the forecasting performance in almost all cases. However, the challenge to identify irregular events and to find the appropriate time series from Google Insights for search remains.

Role of Motor Vehicle Lifetime Extension in Climate Change Policy

Vehicle replacement schemes such as the "cash for clunkers" program in the U.S. and the "scrappage scheme" in the UK have featured prominently in the economic stimulation packages initiated by many governments to cope with the global economic crisis. While these schemes were designed as economic instruments to support the vehicle production industry, governments have also claimed that these programs have environmental benefits such as reducing CO2 emissions by bringing more fuel-efficient vehicles onto the roads. However, little evidence is available to support this claim as current energy and environmental accounting models are inadequate for comprehensively capturing the economic and environmental trade-offs associated with changes in product life and product use. We therefore developed a new dynamic model to quantify the carbon emissions due to changes in product life and consumer behavior related to product use. Based on a case study of Japanese vehicle use during the 1990-2000 period, we found that extending, not shortening, the lifetime of a vehicle helps to reduce life-cycle CO2 emissions throughout the supply chain. Empirical results also revealed that even if the fuel economy of less fuel-efficient ordinary passenger vehicles were improved to levels comparable with those of the best available technology, i.e. hybrid passenger cars currently being produced in Japan, total CO2 emissions would decrease by only 0.2%. On the other hand, we also find that extending the lifetime of a vehicle contributed to a moderate increase in emissions of health-relevant air pollutants (NOx, HC, and CO) during the use phase. From the results, this study concludes that the effects of global warming and air pollution can be somewhat moderated and that these problems can be addressed through specific policy instruments directed at increasing the market for hybrid cars as well as extending lifetime of automobiles, which is contrary to the current wisdom.

The Effects of Fiscal Stimulus: Evidence from the 2009 ‘Cash for Clunkers’ Program

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.

Do Public Subsidies Sell Green Cars? Evidence from the U.S. 'Cash for Clunkers' Program

One question surrounding the 2009 U.S. “Cash for Clunkers” program is whether it induced consumers to purchase greener vehicles than they would otherwise have purchased. This paper views the program as a natural experiment, which offered higher rebates to consumers buying more fuel-efficient vehicles, and shows that awarding an extra $1,000 on a vehicle made 7.2% of consumers switch to it. Hence the program, giving away nearly $3 billion, should have drawn many consumers to the subsidized greener vehicles, producing substantial environmental gains. This finding should interest policymakers evaluating similar programs to stimulate the economy while aiding the environment.

Cash for clunkers: You read it here first

Cash for clunkers: You read it here first

Is CARS a Clunker?

Burton Abrams and George Parsons of the University of Delaware evaluate the efficiency of the recently introduced 'Cash for Clunkers' program and conclude that the cost exceeds the benefit by approximately $2000 per vehicle.

Motorcycles retirement program: Choosing the appropriate regulatory framework

This paper studies instrument choice under market-based regulations when governments expropriate private property in order to protect the environment. The analysis uses survey data collected for Bangkok's old motorcycle retirement program. While the literature studies only “Cash for Clunkers” schemes, this hypothetical experiment allows us to compare owners’ preferences for alternative schemes. Policy implications of the proposed schemes can be inferred after examining owners’ responses to different financial incentive provided by the government. Our analysis provides criteria that could be used when choosing one scheme over another.