American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand
American Economic Journal: Economic Policy
vol. 12,
no. 4, November 2020
(pp. 178–211)
Abstract
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.Citation
Green, Daniel, Brian T. Melzer, Jonathan A. Parker, and Arcenis Rojas. 2020. "Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand." American Economic Journal: Economic Policy, 12 (4): 178–211. DOI: 10.1257/pol.20170122Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E62 Fiscal Policy
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H31 Fiscal Policies and Behavior of Economic Agents: Household
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