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Trade Liberalization, Consumption Shifting and Pollution: Evidence from Mexico's Used Vehicle Imports

Chen Liang, Garcia-Medina Cecilia and Wan Rui

No 2022-02, Working Papers from Banco de México

Abstract: This paper develops a model of used vehicle trade between countries with different environmental regulations regarding vehicle emissions. We show that the US, given its strict environmental regulations, has incentives to export used vehicles to Mexico, which impacts air pollution emissions caused by automobile driving in Mexico. Using a unique database on vehicle registration in Mexico and imports after the NAFTA enactment, we find that Mexico's used vehicle imports reduced average pollution emissions generated by vehicles, mainly due to the "technique effect" -differences in emissions of vehicles of comparable model and age between those that operate in the US before being imported (that emit less pollutants) and those operating in Mexico.

Keywords: Trade Liberalization; Used Vehicles; Pollution Emissions; Technique Effect (search for similar items in EconPapers)
JEL-codes: F13 L62 Q51 Q56 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-ban, nep-ene, nep-env, nep-int and nep-tre
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