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

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Author Info
Sofronis Clerides

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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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File URL: http://www.econ.ucy.ac.cy/research/working_papers/2004/6-2004.pdf
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Publisher Info
Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 6-2004.

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Length: 25 pages
Date of creation: Dec 2004
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Handle: RePEc:ucy:cypeua:6-2004

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Web page: http://www.econ.ucy.ac.cy

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

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References listed on IDEAS
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.:
  1. Daniel A. Ackerberg & Marc Rysman, 2005. "Unobserved Product Differentiation in Discrete-Choice Models: Estimating Price Elasticities and Welfare Effects," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 771-788, Winter.
    Other versions:
  2. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," Econometric Society 2004 North American Summer Meetings 508, Econometric Society. [Downloadable!]
    Other versions:
  3. Chaim Fershtman & Neil Gandal, 1998. "The Effect of the Arab Boycott on Israel: The Automobile Market," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 193-214, Spring. [Downloadable!] (restricted)
  4. Smith, M A M, 1976. "International Trade Theory in Vintage Models," Review of Economic Studies, Blackwell Publishing, vol. 43(1), pages 99-113, February. [Downloadable!] (restricted)
  5. Sofronis Clerides & Costas Hadjiyiannis, 2004. "Trade-Inducing Quality Standards for Used Durables," University of Cyprus Working Papers in Economics 5-2004, University of Cyprus Department of Economics. [Downloadable!]
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  6. Bond, Eric W, 1982. "A Direct Test of the "Lemons" Model: The Market for Used Pickup Trucks," American Economic Review, American Economic Association, vol. 72(4), pages 836-40, September. [Downloadable!] (restricted)
  7. Bond, Eric W, 1983. "Trade in Used Equipment with Heterogeneous Firms," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 688-705, August. [Downloadable!] (restricted)
  8. Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August. [Downloadable!] (restricted)
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  9. Robert H. Porter & Peter Sattler, 1999. "Patterns of Trade in the Market for Used Durables: Theory and Evidence," NBER Working Papers 7149, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Nagaoka, Sadao & Kimura, Fukunari, 1999. "The Competitive Impact of International Trade: The Case of Import Liberalization of the Japanese Oil Product Market," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 397-423, December. [Downloadable!] (restricted)
  11. 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, Oxford University Press, vol. 14(1), pages 91-109, January.
  12. Danilo Pelletiere & Kenneth A. Reinert, 2004. "Used automobile protection and trade: Gravity and ordered probit analysis," Empirical Economics, Springer, vol. 29(4), pages 737-751, December. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Goldberg, Pinelopi Koujianou & Verboven, Frank, 2001. "The Evolution of Price Dispersion in the European Car Market," Review of Economic Studies, Blackwell Publishing, vol. 68(4), pages 811-48, October.
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  15. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August. [Downloadable!] (restricted)
  16. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer. [Downloadable!] (restricted)
  18. Genesove, David, 1993. "Adverse Selection in the Wholesale Used Car Market," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 644-65, August. [Downloadable!] (restricted)
  19. Giorgio Barba Navaretti & Isidro Soloaga & Wendy Takacs, 1998. "Bargains Rejected? Developing Country Trade Policy on Used Equipment," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 12(2), pages 353-362, 07. [Downloadable!] (restricted)
  20. repec:rus:hseeco:121669 is not listed on IDEAS
  21. Grubel, Herbert G., 1980. "International trade in used cars and problems of economic development," World Development, Elsevier, vol. 8(10), pages 781-788, October. [Downloadable!] (restricted)
  22. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-79, April. [Downloadable!] (restricted)
  23. repec:cup:etheor:v:13:y:1997:i:2:p:185-213 is not listed on IDEAS
  24. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  25. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Nkunde Mwase, 2006. "An Empirical Investigation of the Exchange Rate Pass-Through to Inflation in Tanzania," IMF Working Papers 06/150, International Monetary Fund. [Downloadable!]
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