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International Trade in Used Vehicles: The Environmental Consequences of NAFTA

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Author Info

  • Lucas W. Davis

    (University of Michigan)

  • Matthew E. Kahn

    (University of California, Los Angeles)

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    Abstract

    Previous studies of trade and the environment overwhelmingly focus on how trade affects where goods are produced. However, trade also affects where goods are consumed. In this paper we describe a model of trade with durable goods and non-chomothetic preferences. In autarky, used goods are relatively inexpensive in high-income countries and free trade causes these goods to be exported to low-income countries. We then evaluate the environmental consequences of this pattern of trade using evidence from 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, vehicle-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.

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    File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers576-600/r584.pdf
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    Bibliographic Info

    Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 584.

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    Length: 44 pages
    Date of creation: Jan 2009
    Date of revision:
    Handle: RePEc:mie:wpaper:584

    Contact details of provider:
    Postal: ANN ARBOR MICHIGAN 48109
    Web page: http://www.fordschool.umich.edu/rsie/
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    Related research

    Keywords: trade; environment; NAFTA; consequences;

    This paper has been announced in the following NEP Reports:

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    Cited by:
    1. 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.

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