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Gains From Trade in Used Goods: Evidence from the Global Market for Automobiles

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  • Clerides, Sofronis

Abstract

This Paper investigates the welfare effects of trade liberalization by exploiting a natural policy experiment in the small open economy of Cyprus. A 1993 law relaxed import restrictions on used vehicles and facilitated the flow of used Japanese vehicles into the country. This led to a dramatic shift of consumer purchases from new to used cars and a substantial expansion of the overall market. Estimated welfare gains are of the order of several hundred dollars per purchaser. The findings are indicative of the potential for substantial gains from liberalizing trade in used goods, which could also alter trade flows and production.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4859.

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Date of creation: Jan 2005
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Handle: RePEc:cpr:ceprdp:4859

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Keywords: automobile industry; differentiated products; gains from trade; trade liberalization; used goods;

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References

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  1. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
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  23. Navaretti, Giorgio Barba & Soloaga, Isidro & Takacs, Wendy, 2000. "Vintage Technologies and Skill Constraints: Evidence from U.S. Exports of New and Used Machines," World Bank Economic Review, World Bank Group, vol. 14(1), pages 91-109, January.
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  26. repec:cup:etheor:v:13:y:1997:i:2:p:185-213 is not listed on IDEAS
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Citations

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Cited by:
  1. Clerides, Sofronis & Hadjiyiannis, Costas, 2008. "Quality standards for used durables: An indirect subsidy?," Journal of International Economics, Elsevier, vol. 75(2), pages 268-282, July.
  2. Clerides, Sofronis, 2008. "Gains from trade in used goods: Evidence from automobiles," Journal of International Economics, Elsevier, vol. 76(2), pages 322-336, December.
  3. Nkunde Mwase, 2006. "An Empirical Investigation of the Exchange Rate Pass-Through to Inflation in Tanzania," IMF Working Papers 06/150, International Monetary Fund.

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