Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies

Jerome Adda () and Russell Cooper

No 6048, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the effects of subsidies on durable goods markets. In particular, we study a recent policy in France in which the governments of Balladur and Jupp‚ subsidized the replacement of old cars with new ones. To study this policy, we construct a dynamic stochastic discrete choice model of car ownership at the household level. The resulting decision rules and equilibrium conditions are used to estimate, using aggregate data, the underlying parameters of the model. These policy functions are used to evaluate the short and long run effects of the French policies. We find that these policies do stimulate the automobile sector in the short run but, through the induced changes in the cross sectional distribution of car ages, create the basis for subsequent low activity. Further, while these policies increase government revenues in the short run, revenues in the long run are lower relative to a baseline without intervention.

JEL-codes: E62 E65 (search for similar items in EconPapers)
Date: Written 1997-05
Note: EFG
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Published as Adda, Jerome and Russell Cooper. "Balladurette And Juppette: A Discrete Analysis Of Scrapping Subsidies," Journal of Political Economy, 2000, v108(4,Aug), 778-806.

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Related works:
Working Paper: Balladurette and jupette: a discrete analysis of scrapping subsidies (1997)
Working Paper: Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies (1997)
Journal Article: Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies (2000)
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