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

Author

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  • Bertolotti, Fabio
  • Gavazza, Alessandro
  • Lanteri, Andrea
Abstract
We study the role of new-product quality for the dynamics of durable-goods expenditures around the Great Recession. We assemble a rich dataset on US new-car markets during 2004-2012, 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.

Suggested Citation

  • Bertolotti, Fabio & Gavazza, Alessandro & Lanteri, Andrea, 2022. "Dynamics of Expenditures on Durable Goods: the Role of New-Product Quality," CEPR Discussion Papers 16283, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16283
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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