Wednesday, August 6, 2014

Cash for Clunkers cost automakers big money

A new bit of research casts an even more dubious light over the already dubious automaker stimulus effort.

The study's synopsis:
Cash for Clunkers was a 2009 economic stimulus program aimed at increasing new vehicle spending by subsidizing the replacement of older vehicles. Using a regression discontinuity design, we show the increase in sales during the two month program was completely offset during the following seven to nine months, consistent with previous research. However, we also find the program's fuel efficiency restrictions induced households to purchase more fuel efficient but less expensive vehicles, thereby reducing industry revenues by three billion dollars over the entire nine to eleven month period. This highlights the conflict between the stimulus and environmental objectives of the policy.
Assessing the study, The Wall Street Journal notes:
Extrapolated nationally, auto revenues may have plunged by more than what the government spent.
Good intentions, coupled with unsound economic tinkering, generally fails to achieve the intended results.

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