Working Paper: CEPR ID: DP4838
Authors: Sofronis Clerides; Costas Hadjiyiannis
Abstract: We construct a theoretical framework to study the impact of asymmetric quality standards on used durable goods on trade flows, profits and consumer welfare. We show that asymmetry in quality standards generates trade in used goods from high to low standard countries while at the same time reducing trade in new goods. The industry in the exporting country benefits from this change while consumers lose out. Consumers in the importing country are the biggest beneficiaries, but domestic industry is hurt. These results suggest that quality standards on used goods are a powerful policy tool whose use should be monitored by the WTO.
Keywords: durable goods; quality standards; trade in used goods; used durables
JEL Codes: F10; L10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Asymmetric quality standards (L15) | Trade in used goods (F19) |
| Asymmetric quality standards (L15) | Trade in new goods (F19) |
| Asymmetric quality standards (L15) | Exporting country benefits (F10) |
| Asymmetric quality standards (L15) | Consumers in exporting country face higher prices (F14) |
| Trade in used goods (F19) | Consumers in importing country benefit (F14) |
| Trade in used goods (F19) | Domestic industry in importing country negatively affected (F14) |
| Asymmetric quality standards (L15) | Indirect subsidy to domestic industry in exporting countries (F18) |
| Asymmetric quality standards (L15) | Competition from used goods mitigated (F69) |