International Trade in Used Vehicles: The Environmental Consequences of NAFTA
AbstractOver 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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Bibliographic InfoPaper 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.
Date of creation: 10 Feb 2009
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Other versions of this item:
- Lucas W. Davis & Matthew E. Kahn, 2010. "International Trade in Used Vehicles: The Environmental Consequences of NAFTA," American Economic Journal: Economic Policy, American Economic Association, vol. 2(4), pages 58-82, November.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- 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
- Does Free Trade Reduce the Female/Male Wage Gap?
by Matthew Kahn in Environmental and Urban Economics on 2012-07-14 04:47:00
- 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
- Mexico as a Lead Pollution Haven
by Matthew E. Kahn in Legal Planet on 2013-02-09 16:05:09
- 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
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