Working Paper: NBER ID: w1978
Authors: Robert C. Feenstra
Abstract: We present a methodology for estimating the welfare gains from a product \nwith new characteristics, and apply it to Japanese and American compact \ntrucks. Our approach can be used on any products for which a hedonic \nregression can be estimated. For 1979-80 we find average welfare gains of \n$500-600 per Japanese truck. In later years the benefit to consumers is \nreduced by the tariff on imports and the introduction of American compact \nmodels. American compacts have consumer gains which are much less than the \naverage for Japanese models, since for each American compact there is an \nimport with very similar characteristics.
Keywords: welfare gains; differentiated products; hedonic regression; compact trucks; international trade
JEL Codes: F1; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Introduction of Japanese compact trucks (L92) | Average welfare gains of $500-$600 per truck (D69) |
| Imposition of a 25% tariff on Japanese trucks (F14) | Reduction in consumer gains (D11) |
| Introduction of American compact trucks (N72) | Lower average consumer gain than Japanese models (F11) |
| Availability of competing models (C52) | Consumer welfare (D69) |
| Tariffs and market competition (L11) | Decrease in consumer welfare gains (D11) |