Identifying Odometer Fraud: Evidence from the Used Car Market in the Czech Republic
ISE Working Paper No. 4
22 Pages Posted: 22 Jun 2015 Last revised: 28 Dec 2016
Date Written: January 1, 2017
This paper investigates the presence of odometer fraud in the used-car market using a unique dataset of 250,000 car-sale ads from the Czech Republic. Alternative identification techniques are discussed. However, selection into the market as well as the practice of rounding odometer readings — possibly strategic yet innocent — render the standard statistical tests unusable. A modification of the last-digit test, which was previously used to detect fraud in election and accounting data, is therefore developed and employed. The results suggest that suspicious patterns are more prevalent in the segment of cars imported from abroad. I also show that this methodology can be used at the firm-level, which may be of interest to authorities and market participants.
Keywords: Used car market, odometer fraud, digit tests
JEL Classification: K42, R40
Suggested Citation: Suggested Citation