The Effectiveness of Old Car Scrappage Subsidies as a Key Economic Tool for Ensuring the Competitiveness of European Countries
Petr Makovský, František Hřebík, Matouš Machka, Theodor Beran, Felicita Chromjaková
Keywords:
Mankiw’s puzzle, scrappage scheme, mixed autoregressive processes, consumption of durable goods, permanent income
Abstract:
This article focuses on the effectiveness of state subsidies for fleet renewal across Europe. The research analyzes and subsequently compares the situation in the Czech Republic and in other European countries, using separate country-level time series data. The theoretical framework is based on Mankiw’s theory of long-term consumption, the validity of which has not previously been confirmed by empirical data in several research studies. This discrepancy is known in the scientific literature as Mankiw’s puzzle. The methodological part of the research used statistical testing to determine the extent to which the puzzle is realized in individual European countries. The testing was carried out on long time series, focusing on two key variables: newly registered cars and household expenditure on durable goods. The formal evaluation rejected the universal validity of the strict ARMA(1,1) specification, although significant structural differences were identified across the sample. On this basis, a clear country typology was established, dividing European economies into high-inertia automotive markets, structural postponers, and martingale adaptors. This typology demonstrates how consumption persistence determines the transmission and ultimate efficacy of car scrapping policies for electromobility adoption and regional economic competitiveness. The research has also revealed a systemic connection between the competitiveness of automotive production and the sustainability of the fleet ecosystem. In the Czech Republic, the effective replacement of old cars with combustion engines is conditioned by subsidies for their disposal, whereas in other countries the expected effect of such subsidies is marginal.
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 10.7441/joc.2026.03.08
Makovský, P., Hřebík, F., Machka, M., Beran, T., & Chromjaková, F. (2026). The effectiveness of old car scrappage subsidies as a key economic tool for ensuring the competitiveness of European countries. Journal of Competitiveness, 18(3), 212–236. https://doi.org/10.7441/joc.2026.03.08
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