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Dynamics of expenditures on durable goods: the role of new-product quality

Bertolotti, Fabio, Gavazza, Alessandro ORCID: 0000-0001-9236-5813 and Lanteri, Andrea (2023) Dynamics of expenditures on durable goods: the role of new-product quality. Economic Journal, 133 (652). 1641 - 1656. ISSN 0013-0133

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Identification Number: 10.1093/ej/uead006

Abstract

We study the role of new-product quality for the dynamics of durable-good expenditures around the Great Recession. We assemble a rich dataset on US new-car markets during 2004–12, combining data on transaction prices with detailed information about vehicles’ technical characteristics. During the recession, a reallocation of expenditures away from high-quality new models accounts for a significant decline in the dispersion of expenditures. In turn, car manufacturers introduced new models of lower quality. The drop in new-model quality persistently depressed the technology embodied in vehicles, and likely contributed to the slow recovery of expenditures.

Item Type: Article
Official URL: https://academic.oup.com/ej
Additional Information: © 2023 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E23 - Production
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
Date Deposited: 11 Jan 2023 10:54
Last Modified: 15 Sep 2023 17:27
URI: http://eprints.lse.ac.uk/id/eprint/117851

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