Cash for Corollas: When Stimulus Reduces Spending

NBER Working Paper No. 20349

Issued in July 2014, Revised in May 2015

NBER Program(s):Environment and Energy Economics, Industrial Organization, Public Economics



The 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which was experiencing disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show nearly 60 percent of the subsidies went to households who would have purchased during the two-month program anyway; the rest accelerated sales by no more than eight months. Moreover, the program’s fuel efficiency restrictions shifted purchases toward vehicles that cost on average $5,000 less. On net, Cash for Clunkers significantly reduced total new vehicle spending over the ten month period.

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Document Object Identifier (DOI): 10.3386/w20349

Published: Mark Hoekstra & Steven L. Puller & Jeremy West, 2017. "Cash for Corollas: When Stimulus Reduces Spending," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 1-35, July. citation courtesy of

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