Proponents of fiscal stimulus argue that targeted subsidies can spur consumers to shift purchases from well into the future to today, and thereby help jumpstart the economy. Opponents contend that while subsidies may induce purchases today, the effect is almost completely reversed when consumers subsequently purchase fewer goods tomorrow. We inform this debate by examining the 2009 Cars Allowance Rebate System program, commonly known as “cash for clunkers.” The basic idea is to compare the pattern of auto purchases in cities with a high and low number of clunkers to get a sense of what would have happened in the absence of the program.
Economics and Elections
Economics and Elections
November 21st, 2024
