Quality Standards for Used Durables: An Indirect Subsidy?

31 Pages Posted: 11 Feb 2008 Last revised: 27 Oct 2009

Sofronis Clerides

University of Cyprus - Department of Economics; Centre for Economic Policy Research (CEPR); University of Bologna - Rimini Center for Economic Analysis (RCEA)

Costas Hadjiyiannis

University of Cyprus - Department of Economics

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Date Written: July 2008

Abstract

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

Clerides, Sofronis and Hadjiyiannis, Costas, Quality Standards for Used Durables: An Indirect Subsidy? (July 2008). Journal of International Economics, Vol. 75, No. 2, 2008. Available at SSRN: https://ssrn.com/abstract=1091077

Sofronis Clerides (Contact Author)

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+35 7 2289 2450 (Phone)
+35 7 2289 2432 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Costas Hadjiyiannis

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus

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