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Equilibrium Trade in Automobiles

Author

Listed:
  • Kenneth Gillingham
  • Fedor Iskhakov
  • Anders Munk-Nielsen
  • John Rust
  • Bertel Schjerning

Abstract

We introduce a computationally tractable dynamic equilibrium model of automobile markets with heterogeneous consumers, focused on stationary flow equilibria. We introduce a fast, robust algorithm for computing equilibria and use it to estimate a model using nearly 39 million observations on car ownership transitions from Denmark. The estimated model fits the data well, and counterfactual simulations show that Denmark could raise total tax revenue by reducing the new-car registration tax rate. We show that reducing this tax rate while raising the tax rate on fuel increases aggregate welfare, tax revenue, and car ownership, while reducing car ages, driving, and CO2 emissions.

Suggested Citation

  • Kenneth Gillingham & Fedor Iskhakov & Anders Munk-Nielsen & John Rust & Bertel Schjerning, 2022. "Equilibrium Trade in Automobiles," Journal of Political Economy, University of Chicago Press, vol. 130(10), pages 2534-2593.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/720463
    DOI: 10.1086/720463
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    Cited by:

    1. Scott A. Brave & Thomas H. Klier & Leslie McGranahan, 2023. "Charged and Almost Ready—What Is Holding Back the Resale Market for Battery Electric Vehicles?," Working Paper Series WP 2023-35, Federal Reserve Bank of Chicago.
    2. Corey J.M. Williams & Kole Reddig & Adam Nowak, "undated". "Collectible Pricing and Collector Utility: The Role of Production Commitments," Working Papers 24-03, Department of Economics, West Virginia University.
    3. Gøril L. Andreassen & Jo Thori Lind, 2024. "Climate, Technology and Value: Insights from the First Decade with Mass-Consumption of Electric Vehicles," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(7), pages 1783-1844, July.
    4. Thomas J. Sargent & John Stachurski, 2024. "Dynamic Programming: Finite States," Papers 2401.10473, arXiv.org.
    5. Sargent, Thomas J., 2024. "Critique and consequence," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 2-13.

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