Thursday, May 5, 2011

Cash for Clunkers

NBER Working Paper "The Effects of Fiscal Stimulus: Evidence from the 2009 'Cash for Clunkers' Program (NBER Working Paper, 2010) (gated) by Atif Mian and Amir Sufi provides a great "economist" story.  They look at the Cash for Clunkers program and find that it caused 360,000 extra cars to be purchased, almost all of them coming from people who would have bought cars sometimes in the next seven months.  That is, it did not generate "new" car sales, only pulled them sooner from the future.  Enacted in July and August 2009, its effects were reversed by March 2010.

Their figure displays it best: a thin, sharp upward spike with a lower-than average drop-off for the next five months (click to enlarge).

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