Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand

Daniel Green, Brian Melzer, Jonathan Parker and Arcenis Rojas

No 22878, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We evaluate the Car Allowance Rebate System (CARS) by comparing the vehicle purchases and disposals of households with eligible “clunkers” to those of households with similar, but ineligible, vehicles. We find that CARS caused roughly 500,000 purchases during the program period and that the liquidity provided by CARS was critical for generating this large response. CARS provided less liquidity for households owning clunkers securing loans, since participation required loan repayment. The participation rate of these households was low, which we attribute to liquidity constraints and distinguish from the effects of other indebtedness, household income, and the size of the program subsidy.

JEL-codes: D14 E62 G18 H24 H31 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-mac and nep-tre
Note: AP CF EFG ME PE
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Published as Daniel Green & Brian T. Melzer & Jonathan A. Parker & Arcenis Rojas, 2020. "Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand," American Economic Journal: Economic Policy, vol 12(4), pages 178-211.

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