Qualitative Effects of “Cash-for-Clunkers” Programs ? Eugenio J. Miravete† Mar´ıaJ. Moral‡ October 5, 2011 Abstract “Cash-for-Clunkers” programs are credited with increasing automobile sales only temporarily. We analyze the Spanish automobile market during the 1990s to argue that such policy inter- ventions may induce permanent qualitative effects by shifting the demand towards fuel efficient vehicles, thus changing the composition of the automobile fleet in the long run. Between 1994 and 2000 the market share of diesel automobiles increased from 27% to 54%. Sales of diesel vehicles after the Spanish government sponsored two scrappage programs was more important across most popular market segments. As diesel vehicles became mainstream they also became closer substitutes to gasoline models. Keywords: Scrappage Programs, Fuel Efficiency, Diffusion of New Durable Goods, Diesel Engines, TDI Technology. JEL Codes: L51, L62, Q28. ? We thank comments by Kenneth Hendricks, Consuelo Paz´o,Pasquale Schiraldi, Philipp Schmidt-Dengler, and audiences at the University of Michigan and Texas-Austin, as well as the XI CEPR Conference on Applied Industrial Organization in Toulouse. We are solely responsible for any errors that may still remain. Moral gratefully acknowledges funding from the Spanish Ministry of Education and Science through grants SEJ2007-66520/ECON and ECO2008-05771. †The University of Texas at Austin, Department of Economics, BRB 1.116, 1 University Station C3100, Austin, Texas 78712-0301; and CEPR, London, UK. Phone: 512-232-1718. E–mail:
[email protected]; http://www.eugeniomiravete.com ‡Facultad de Ciencias Econ´omicas y Empresariales, UNED, Paseo Senda del Rey, 11, 28040, Madrid, Spain; and GRiEE, Vigo, Spain; Phone: +34-91-398-8930.