From Consumer Incomes to Car Ages: How the Distribution of Income Affects the Distribution of Vehicle Vintages
AbstractThis paper studies the relationship between consumer incomes and ages of the durable goods consumed. At the household level, it presents evidence from the Consumer Expenditure Survey of a negative correlation between incomes and ages of the vehicles owned. At the aggregate level, it constructs a dynamic, heterogeneous agents, discrete choice model, to study the relationship between the distribution of consumer incomes and the distribution of vehicle vintages. The model's parameters are calibrated to match vehicle ownership data for 2001. The moments of the income distribution are then varied to generate predictions for mean and median ages of vehicles. The model predicts that higher levels of income inequality lead to older vehicle stocks. If the initial incomes are low, increasing mean income may lead to the aging of vehicles by encouraging entry of lower income consumers into vehicle ownership via purchases of older vehicles. Beyond a certain income level, however, economies with higher mean incomes have younger vehicle stocks.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 8849.
Date of creation: May 2008
Date of revision: Apr 2008
income distribution; motor vehicles; heterogeneous agents models; intertemporal consumer choice; discrete choice;
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-31 (All new papers)
- NEP-DCM-2008-05-31 (Discrete Choice Models)
- NEP-DGE-2008-05-31 (Dynamic General Equilibrium)
- NEP-MKT-2008-05-31 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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NBER Working Papers
6048, National Bureau of Economic Research, Inc.
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- Adda, JC, 2000. "Balladurette and Juppette: A discrete analysis of scrapping subsidies," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Antonio R. Sampayo & Luis A. Puch & Omar Licandro, 2006. "Secondhand market and the lifetime of durable goods," Working Papers 2006-10, FEDEA.
- Jerome Adda & Russell Cooper, 2000. "The Dynamics of Car Sales: A Discrete Choice Approach," NBER Working Papers 7785, National Bureau of Economic Research, Inc.
- Karl Storchmann, 2004. "On the Depreciation of Automobiles: An International Comparison," Transportation, Springer, vol. 31(4), pages 371-408, November.
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