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ENVIRONMENTALISM, STIMULUS, AND INEQUALITY REDUCTION THROUGH INDUSTRIAL POLICY: DID CASH FOR CLUNKERS ACHIEVE THE TRIFECTA?
Author(s) -
Miller Keaton S.,
Wilson Wesley W.,
Wood Nicholas G.
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12889
Subject(s) - economics , subsidy , liberian dollar , inequality , portfolio , cash , economic surplus , public economics , macroeconomics , welfare , finance , mathematical analysis , mathematics , market economy
The 2009 American Cash for Clunkers program, which subsidized consumers who scrapped old vehicles and purchased new vehicles, was promoted by appealing to multiple constituencies. We evaluate the policy and alternatives according to its stated goals: emissions reductions, economic stimulus, and reducing inequality. We calibrate a dynamic partial equilibrium portfolio model to match consumer expenditure data from 1998 to 2011 focusing on heterogeneity across cars and trucks. We find the program generated $0.17 in environmental benefits, $0.28 in consumer surplus, and $0.31 in net discounted additional spending per subsidy dollar. Since subsidies largely went to middle‐income infra‐marginal consumers, the program exacerbated consumption inequality. We evaluate alternative policy designs and find no policy which simultaneously improves all outcomes. ( JEL H23, L52, L92, D63)