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

28 Pages Posted: 11 May 2005  

Sofronis Clerides

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

Date Written: January 2005

Abstract

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.

Keywords: Automobile industry, differentiated products, gains from trade, used goods, trade liberalization

JEL Classification: F14, L13, L92

Suggested Citation

Clerides, Sofronis, Gains from Trade in Used Goods: Evidence from the Global Market for Automobiles (January 2005). CEPR Discussion Paper No. 4859. Available at SSRN: https://ssrn.com/abstract=721603

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

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