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K orea's Cash‐for‐Clunkers Program: Household‐Level Evidence
Author(s) -
Min Heechul
Publication year - 2015
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12078
Subject(s) - subsidy , cash , economics , difference in differences , control (management) , aggregate (composite) , finance , business , econometrics , microeconomics , management , market economy , materials science , composite material
This paper examines the effects of a vehicle subsidy program introduced in K orea in the wake of the 2008 global recession. I adopt a simple binary choice model to approximate a household's decision to purchase a new car and identify the policy effect using a difference‐in‐difference framework in which non‐eligible households serve as the control group. The estimation results are as follows. First, the subsidy program significantly boosted the overall demand for new vehicles, increasing the average probability of a new purchase by eligible households from 7.1 to 13.9 percent. Second, beneficiaries of the subsidy program were mostly rich households and those owning relatively new cars. Finally, the program effect on aggregate vehicle sales was not quickly reversed in contrast to recent evidence on the comparable US program.