Dynamics of Expenditures on Durable Goods: The Role of New-Product Quality

Fabio Bertolotti, Alessandro Gavazza and Andrea Lanteri

The Economic Journal, 2023, vol. 133, issue 652, 1641-1656

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.

Date: 2023
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Working Paper: Dynamics of expenditures on durable goods: the role of new-product quality (2023)
Working Paper: Dynamics of Expenditures on Durable Goods: the Role of New-Product Quality (2022)
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