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International Trade in Used Vehicles: The Environmental Consequences of NAFTA

Author

Listed:
  • Lucas W. Davis

    (University of Michigan)

  • Matthew E. Kahn

    (University of California, Los Angeles)

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.

Suggested Citation

  • Lucas W. Davis & Matthew E. Kahn, 2009. "International Trade in Used Vehicles: The Environmental Consequences of NAFTA," Working Papers 584, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:584
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    File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers576-600/r584.pdf
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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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    Keywords

    trade; environment; NAFTA; consequences;

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