Working Paper: CEPR ID: DP16283
Authors: Fabio Bertolotti; Alessandro Gavazza; Andrea Lanteri
Abstract: We study the role of new-product quality for the dynamics of durable-goods expenditures around the Great Recession. We assemble a rich dataset on US new-car markets during 2004-2012, combining data on transaction prices with detailed information about vehicles' technical characteristics. During the recession, a reallocation of expenditures away from high-quality new models accounts for a significant decline in the dispersion of expenditures. In turn, car manufacturers introduced new models of lower quality. The drop in new-model quality persistently depressed the technology embodied in vehicles, and likely contributed to the slow recovery of expenditures.
Keywords: No keywords provided
JEL Codes: E21; E23; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial drop in consumer demand (D12) | reduction in the introduction of high-quality new models (L15) |
| reduction in the introduction of high-quality new models (L15) | decline in overall vehicle technology (L62) |
| high-quality new models (C52) | decline in the dispersion of expenditures (H53) |
| shift towards continuing models (O41) | decline in average and standard deviation of new car expenditures (E20) |
| drop in new model quality (C52) | slow recovery of expenditures (H54) |
| quality of new products (L15) | dynamics of consumer spending (D12) |