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.
This is remarkable. At the time, the most obvious criticism of the scheme was that it would simply alter the timing of purchases.
And scholars the following year confirmed that the program didn’t have any long-run impact.
But now we find out that there was impact, but it was negative. Here’s the most relevant graph from the study. It shows actual vehicle spending and estimated spending in the absence of the program