The Cost of Greening Stimulus: A Dynamic Discrete Choice Analysis of Vehicle Scrappage Programs

Shanjun Li and Chao Wei

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: During the recent economic crisis, many countries have adopted stimulus programs designed to achieve two goals: to stimulate economic activity in lagging durable goods sectors and to protect or even enhance environmental quality. The environmental bene ts are often viewed and much advocated as co-bene ts of economic stimulus. This paper investigates the potential tradeo between the stimulus and environmental objectives in the context of the popular U.S. Cash-for-Clunkers (CFC) program by developing and estimating a dynamic discrete choice model of vehicle ownership. Results from counterfactual analysis show that design elements to achieve environmental bene ts could signi cantly limit the program impact on demand stimulus: the cost of demand stimulus after netting out environmental bene ts under the program could be 43 percent higher in terms of vehicle sales and 38 percent higher in terms of consumer spending than that from alternative policy designs without explicitly aiming at the environmental objective.

Keywords: Stimulus; Discrete Choice Model; Vehicle Scrappage (search for similar items in EconPapers)
JEL-codes: E62 H23 H31 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2016
New Economics Papers: this item is included in nep-dcm, nep-env and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Cost of Greening Stimulus: A Dynamic Discrete Choice Analysis of Vehicle Scrappage Programs (2015)
Working Paper: The Cost of Greening Stimulus: A Dynamic Discrete Choice Analysis of Vehicle Scrappage Programs (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2016-25

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