Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85261
Authors: 
Leheyda, Nina
Verboven, Frank
Year of Publication: 
2013
Series/Report no.: 
ZEW Discussion Papers 13-079
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.
Subjects: 
scrapping subsidies
economic assessment of state aid
financial crisis
automobile market
JEL: 
H25
L52
F14
Document Type: 
Working Paper

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