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

  • Sofronis Clerides

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://papers.econ.ucy.ac.cy/RePEc/papers/6-2004.pdf
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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
Date of revision:
Handle: RePEc:ucy:cypeua:6-2004
Contact details of provider: Web page: http://www.econ.ucy.ac.cy

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  1. 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.
  2. 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.
  3. 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.
  4. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," Econometric Society 2004 North American Summer Meetings 508, Econometric Society.
  5. 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.
  6. 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.
  7. James Levinsohn, 1991. "Testing the Imports-as-Market-Discipline Hypothesis," NBER Working Papers 3657, National Bureau of Economic Research, Inc.
  8. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
  9. repec:rus:hseeco:121669 is not listed on IDEAS
  10. Pinelopi Koujianou Goldberg & Frank Verboven, 1998. "The Evolution of Price Dispersion in the European Car Market," NBER Working Papers 6818, National Bureau of Economic Research, Inc.
  11. Cardell, N. Scott, 1997. "Variance Components Structures for the Extreme-Value and Logistic Distributions with Application to Models of Heterogeneity," Econometric Theory, Cambridge University Press, vol. 13(02), pages 185-213, April.
  12. Grubel, Herbert G., 1980. "International trade in used cars and problems of economic development," World Development, Elsevier, vol. 8(10), pages 781-788, October.
  13. repec:cup:etheor:v:13:y:1997:i:2:p:185-213 is not listed on IDEAS
  14. 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.
  15. Smith, M. A. M., 1974. "International trade in second-hand machines," Journal of Development Economics, Elsevier, vol. 1(3), pages 261-278, December.
  16. 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.
  17. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  18. 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, World Bank Group, vol. 14(1), pages 91-109, January.
  19. Smith, M A M, 1976. "International Trade Theory in Vintage Models," Review of Economic Studies, Wiley Blackwell, vol. 43(1), pages 99-113, February.
  20. 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.
  21. Giorgio Barba Navaretti & Isidro Soloaga & Wendy Takacs, 1998. "Bargains Rejected? Developing Country Trade Policy on Used Equipment," LABOUR, CEIS, vol. 12(2), pages 353-362, 07.
  22. 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.
  23. Clerides, Sofronis & Hadjiyiannis, Costas, 2005. "Trade-Inducing Quality Standards for Used Durables," CEPR Discussion Papers 4838, C.E.P.R. Discussion Papers.
  24. 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.
  25. 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.
  26. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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