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The Black Market for Beijing License Plates

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  • {O}ystein Daljord
  • Guillaume Pouliot
  • Junji Xiao
  • Mandy Hu

Abstract

Black markets can reduce the effects of distortionary regulations by reallocating scarce resources toward consumers who value them most. The illegal nature of black markets, however, creates transaction costs that reduce the gains from trade. We take a partial identification approach to infer gains from trade and transaction costs in the black market for Beijing car license plates, which emerged following their recent rationing. We find that at least 11% of emitted license plates are illegally traded. The estimated transaction costs suggest severe market frictions: between 61% and 82% of the realized gains from trade are lost to transaction costs.

Suggested Citation

  • {O}ystein Daljord & Guillaume Pouliot & Junji Xiao & Mandy Hu, 2021. "The Black Market for Beijing License Plates," Papers 2105.00517, arXiv.org.
    • Handle: RePEc:arx:papers:2105.00517
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    1. Yang, Jun & Liu, Ying & Qin, Ping & Liu, Antung A., 2014. "A review of Beijing׳s vehicle registration lottery: Short-term effects on vehicle growth and fuel consumption," Energy Policy, Elsevier, vol. 75(C), pages 157-166.
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    Cited by:

    1. Guillaume Allaire Pouliot & Zhen Xie, 2022. "Degrees of Freedom and Information Criteria for the Synthetic Control Method," Papers 2207.02943, arXiv.org.
    2. Hu, Mantian & Xiao, Junji & Zheng, Bingyong, 2022. "The selection effect of quota rationing mechanisms on sales distribution: The convergence of auction and lottery," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 803-819.

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