Scrapping Subsidies During the Financial Crisis - Evidence from the Europe

41 Pages Posted: 9 Sep 2013

See all articles by Nina Leheyda

Nina Leheyda

ZEW – Leibniz Centre for European Economic Research

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

We study the effects of the car scrapping subsidies in Europe during the financial crisis. We make use of a rich data set of all car models sold in nine European countries, observed at a monthly level during 2005-2011. We employ a difference-in-differences approach, exploiting the fact that different countries adopted their programs at different points in time. We find that the scrapping schemes played a strong role in stabilizing total car sales in 2009: they prevented a total car sales reduction of 17.4% in countries with schemes targeted to low emission vehicles, and they prevented a 14.8% sales reduction in countries with non-targeted schemes. In contrast, the scrapping schemes only had small environmental benefits: without the schemes, average fuel consumption of new purchased cars would have been only 1.3% higher in countries with targeted schemes and 0.5% higher in countries with non-targeted schemes. We do not find evidence of crowding out due to substitution from non-eligible to eligible cars in countries with targeted schemes. Finally, we identify some competitive and trade effects from the schemes: domestic car producers benefited at the expense of foreign competitors in the countries where the schemes were not targeted.

Keywords: automobile market, financial crisis, scrapping subsidies

JEL Classification: F14, H25, L52

Suggested Citation

Leheyda, Nina and Verboven, Frank, Scrapping Subsidies During the Financial Crisis - Evidence from the Europe (September 2013). CEPR Discussion Paper No. DP9629, Available at SSRN: https://ssrn.com/abstract=2322724

Nina Leheyda (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
0
Abstract Views
413
PlumX Metrics