Quality Standards for Used Durables: An Indirect Subsidy?
31 Pages Posted: 11 Feb 2008 Last revised: 27 Oct 2009
Date Written: July 2008
We construct a theoretical framework to study the impact of quality standards for used durable goods on trade flows, profits and consumer welfare. We show that asymmetric quality standards generate trade in used goods from high to low standard countries while at the same time reducing trade in new goods. Producers in the exporting country benefit from this change while consumers lose. In the importing country consumers are better off but domestic industry is hurt. These findings suggest that quality standards on used goods may be a powerful policy tool whose use should be monitored by the WTO.
Keywords: quality standards, durable goods, used durables, trade in used goods
JEL Classification: F1, L1
Suggested Citation: Suggested Citation