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Abstract

As part of the environment-related stimulus package implemented in the wake of the 2008 global financial crisis, the Japanese government introduced tonnage and acquisition tax breaks and a subsidy programme for eco-friendly vehicles. However, there has been limited research on their economic effects. Therefore, this paper employs the event study methodology to examine not only the direct economic effects on automobile firms’ performance but also the spillover economic effects on automobile parts firms’ performance of the eco-car tax breaks and eco-car subsidy programme. Our results show that the eco-car tax breaks had lower positive economic direct effects and no positive spillover effects. The eco-car subsidy programme had more significantly positive direct economic effects and positive spillover effects. The eco-car tax breaks and eco-car subsidy programme had dissimilar economic effects because the length of the implementation period and preferential monetary benefits were different in each case. A mixed policy that combines the eco-car tax breaks and the eco-car subsidy programme is preferable to the eco-car tax breaks alone.

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