International Trade in Used Vehicles

Three Great Things About the Paper

Great Idea: Focus on Consumption Pollution It has been virtually ignored in both the empirical and theory literatures. Economics are quite different. Rich countries become the dirty good exporters rather than importers. Probably important empirically.

Great Application: Used Auto trade is large & cars dirty Used Auto sales to Mexico are approximately 800,000 per year. Carbon emissions from lifetime of auto come 93% from use and only 7% from production. Extremely well documented through vehicle registration and air quality tests. Surely Unique for durable goods.

Make and model data tells us that the used vehicles are big, gas guzzlers, and dirty. Regression results from air quality tests indicate the likelihood of super emitters and emission lemons being exported is high. Retirement data indicates exports come from cars that were likely to be scrapped or retired from service. Great Results: Exports are dirty scrap autos

BUT Three Greats do not imply a Great Paper Some Bumps along the Road

What is the Current role of Theory? Theory plays little or no role in the estimation. Nothing from the theory is “tested”. Theory consists of at least three different less than fully specified models. At most theory is used to argue for a certain trade pattern.

Where is the Focus? Paper meanders across topics and questions. Is it about local pollution or global pollution? Is it about trade and consumption based pollution? Is it about the environmental effects of NAFTA or just about trade in Autos.

Missing in Action? 800,000 scrap cars per year are no longer available – who is missing them and what are they using instead? Where is this evidence? Where is the evidence that the US exports didn’t create one for one retirements in Mexico of even dirtier vehicles? Where is the evidence that the number of cars active in Mexico rose because of NAFTA?

Missing in Action II Where is the evidence that the CA and IL samples are representative of the exports to Mexico overall? Where is it shown that the retirement rate comparisons are independent of variation in sales years previous. Where is the model relating the two important margins: new versus used; used versus scrap; in two different countries to show me how they interact with the opening of trade?

Other Questions Are retirement differences really swamped by mileage differences so when you shift a car to Mexico carbon emissions rise? Where do the export cars come from? If retirements have not changed, then they must come from scrap but then what “other market” is now missing 800,000 used cars/year. Find this market, find the evidence.

Find data on used car trade with Canada. Track used cars from Illinois and CA that went to Canada. Is the story the same or different? Canada or at least some provinces have similar air quality tests for autos. How much do second and third emission tests differ from first. If there is a tune-up effect, should you really ignore this? Maybe they are just poorly maintained cars. This is reversable.

Why do I care about whether Mexican new car sales rose or fell? Do I really care whether they substitute for new cars or create new users in the market? This part of the paper is weak. Why keep it. Carbon accounting is highly speculative, and assumption heavy. We must buy 1) car not driven in the U.S. so no bench line emissions in the U.S.; 2) car driven when sold in Mexico and car owners would have walked otherwise (oops this creates carbon); car works until life of 40.

Suggestions Eliminate the theory section entirely, cite related work to argue for trade pattern. Perhaps develop a model with two active margins – new used – used scrap - in two countries to see how they interact with trade. Recognize that this is a paper about the Pollution Haven Hypothesis: it looks like trade is driven by differences in environmental regulation across countries.

Go for the Jugular. If you are right this is a fantastic and important example of how differences in environmental regulation drive trade flows. I would look at the Canadian data to see if your story holds up there, as well look at the distribution of exports from IL and CA data to see if distance matters to type of export and to see if sample is similar.