DP4838 Trade-Inducing Quality Standards for Used Durables

Author(s): Sofronis Clerides, Costas Hadjiyiannis
Publication Date: January 2005
Keyword(s): durable goods, quality standards, trade in used goods, used durables
JEL(s): F10, L10
Programme Areas: Industrial Organization, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4838

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.