Description
Abstract: This article investigates the potential trade‐off between the stimulus and environmental objectives in the context of the U.S. vehicle scrappage program. We develop and estimate a dynamic model of vehicle ownership and conduct a counterfactual analysis comparing the implemented policy with alternative designs. We find the cost of the implemented policy 25% higher in terms of induced sales and 64% higher in terms of induced spending than a policy design without the environmental objective. The findings serve as a caution for green stimulus programs to address both climate change and the economic crisis from the ongoing pandemic.