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International Trade in Used Vehicles: The Environmental Consequences of NAFTA

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  • Davis, Lucas

Abstract

Over the last two decades an unprecedented increase in private vehicle ownership has taken place in the developing world. This growth is due, in part, to increased international trade in used vehicles. In this paper we use theory and empirical evidence to evaluate the environmental implications of free trade in vehicles and other used durable goods. With nonâ€homothetic preferences, used vehicles are relatively inexpensive in highâ€income countries and free trade causes these goods to be exported to lowâ€income countries. We apply this framework to the North American Free Trade Agreement. Since trade restrictions were eliminated in 2005, over 2.5 million used cars have been exported from the United States to Mexico. Using a unique, vehicleâ€level dataset, we find that traded vehicles are dirtier than the stock of vehicles in the United States and cleaner than the stock in Mexico, so trade leads average vehicle emissions to decrease in both countries. Total greenhouse gas emissions increase, primarily because trade gives new life to vehicles that otherwise would have been scrapped. Key Words: Durable Goods, Nonâ€Homothetic Preferences, NAFTA, Climate Change JEL: F18, H23, Q54, Q56.

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Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt98j8m3r6.

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Date of creation: 10 Feb 2009
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Handle: RePEc:cdl:econwp:qt98j8m3r6

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Relive the 1970s? You Can See Your Old Car in Caracas
    by Matthew E. Kahn in Environmental and Urban Economics on 2010-12-13 15:48:00
  2. Does Free Trade Reduce the Female/Male Wage Gap?
    by Matthew Kahn in Environmental and Urban Economics on 2012-07-14 04:47:00
  3. GHG Emissions Growth in LDCs and the Introduction of the $3,000 Nissan
    by Matthew E. Kahn in The Reality-Based Community on 2012-10-02 15:28:19
  4. Mexico as a Lead Pollution Haven
    by Matthew E. Kahn in Legal Planet on 2013-02-09 16:05:09
  5. E-Waste and International Gains to Trade in Used Durables
    by Matthew Kahn in Environmental and Urban Economics on 2013-03-19 14:35:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Lenski, Shoshannah M. & Keoleian, Gregory A. & Moore, Michael R., 2013. "An assessment of two environmental and economic benefits of ‘Cash for Clunkers’," Ecological Economics, Elsevier, vol. 96(C), pages 173-180.
  2. Lucas W. Davis & Alan Fuchs & Paul J. Gertler, 2012. "Cash for Coolers," NBER Working Papers 18044, National Bureau of Economic Research, Inc.
  3. Davis, Lucas W., 2011. "The Effects Of Preferential Vat Rates Near International Borders: Evidence From Mexico," National Tax Journal, National Tax Association, vol. 64(1), pages 85-104, March.
  4. Gibson, Matthew, 2014. "Dirty and perverse: regulation-induced pollution substitution," University of California at San Diego, Economics Working Paper Series qt6tn7t0wv, Department of Economics, UC San Diego.
  5. Mark R. Jacobsen & Arthur A. van Benthem, 2013. "Vehicle Scrappage and Gasoline Policy," NBER Working Papers 19055, National Bureau of Economic Research, Inc.
  6. Lawrence H. Goulder & Mark R. Jacobsen & Arthur A. van Benthem, 2009. "Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits," NBER Working Papers 15337, National Bureau of Economic Research, Inc.
  7. Lawrence Goulder & Mark Jacobsen & Arthur van Benthem, 2009. "Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits," Discussion Papers 08-049, Stanford Institute for Economic Policy Research.

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