The Impact of Environmental Fraud on the Used Car Market: Evidence from Dieselgate

This study explores the effects of Volkswagen’s 2015 emissions scandal (‘Dieselgate’) on the used car market in Israel. Using a difference-in-differences research design and administrative and proprietary data, we find that after Dieselgate the number of transactions involving VW-manipulated cars fell by 18%, and the resale price of these cars fell by 6%. The drop in the number of transactions was concentrated among private sellers. We discuss alternative explanations and suggest that lower willingness-to-pay and adverse selection following Dieselgate could explain our findings.