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Japanese and Korean automobile exports and the Alchian-Allen theorem

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  • Pramesti Resiandini

Abstract

This paper compares data on Japanese and Korean automobile exports to the USA to examine consistency with the Alchian-Allen theorem. The theorem suggests that imposing a per unit charge such as transport cost will lower the relative price and increase the relative consumption of higher quality cars. Empirical results show that the relative price of higher quality cars is not necessarily lower with increased shipping costs, measured by CIF charges (cost, insurance and freight). A possible explanation is that insurance and other shipping charges are imposed based on the car price, and these charges reduce or eliminate the Alchian-Allen effect of per-unit freight charge.

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Bibliographic Info

Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Trade and Global Markets.

Volume (Year): 7 (2014)
Issue (Month): 1 ()
Pages: 86-98

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Handle: RePEc:ids:ijtrgm:v:7:y:2014:i:1:p:86-98

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Web page: http://www.inderscience.com/browse/index.php?journalID=130

Related research

Keywords: international trade; transport costs; Alchian-Allen theorem; dynamic OLS; Japan; Korea; automobile industry; automotive exports; USA; United States; relative prices; higher quality; shipping costs.;

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  1. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  2. Banik, Nilanjan & Biswas, Basudeb, 2007. "Exchange rate pass-through in the U.S. automobile market: A cointegration approach," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 223-236.
  3. Borcherding, Thomas E & Silberberg, Eugene, 1978. "Shipping the Good Apples Out: The Alchian and Allen Theorem Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 131-38, February.
  4. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
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