Scrapping subsidies during the financial crisis - Evidence from the Europe

Nina Leheyda and Frank Verboven

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: We study the effects of the car scrapping subsidies in Europe during the financial crisis. We make use of a rich data set of all car models sold in nine European countries, observed at a monthly level during 2005-2011.We employ a difference-in-differences approach, exploiting the fact that different countries adopted their programs at different points in time. We find that the scrapping schemes played a strong role in stabilizing total car sales in 2009: they prevented a total car sales reduction of 17.4% in countries with schemes targeted to low emission vehicles, and they prevented a 14.8% sales reduction in countries with non-targeted schemes. In contrast, the scrapping schemes only had small environmental benefits: without the schemes, average fuel consumption of new purchased cars would have been only 1.3% higher in countries with targeted schemes and 0.5% higher in countries with non-targeted schemes. We do not find evidence of crowding out due to substitution from non-eligible to eligible cars in countries with targeted schemes. Finally, we identify some competitive and trade effects from the schemes: domestic car producers benefited at the expense of foreign competitors in the countries where the schemes were not targeted.

Date: 2013-08
New Economics Papers: this item is included in nep-eur and nep-tre
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Related works:
Journal Article: Scrapping subsidies during the financial crisis — Evidence from Europe (2016)
Working Paper: Scrapping Subsidies during the Financial Crisis - Evidence from the Europe (2013)
Working Paper: Scrapping subsidies during the financial crisis: Evidence from Europe (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces13.13

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