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Early 20th century American exceptionalism: Production, trade and diffusion of the automobile

Author

Listed:
  • Dong Cheng
  • Mario J Crucini
  • Hyunseung Oh
  • Hakan Yilmazkuday
Abstract
The beginning of the twentieth century provides a unique opportunity to explore the interaction of rapid technological progress and trade barriers in shaping the worldwide diffusion of a new, highly traded good: the automobile. We scrape historical data on the quantity and value of passenger vehicles exported from the United States to other destination countries, annually from 1913 to 1940. We model the rise of US automobile from global obscurity toward a level dependent upon the extent of long-run pass-through of US prices into destination markets and destination GDP per capita. The results based on a diffusion model with CES preferences and non-unitary income elasticity shows that 62% of the gap in diffusion levels between the U.S. and the rest of the world is due to price frictions such as markups, tariffs, and trade costs, while the remaining 38% is due to income effects.

Suggested Citation

  • Dong Cheng & Mario J Crucini & Hyunseung Oh & Hakan Yilmazkuday, 2019. "Early 20th century American exceptionalism: Production, trade and diffusion of the automobile," CAMA Working Papers 2019-58, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2019-58
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2019-08/58_2019_cheng_crucini_oh_yilmazkuday.pdf
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    References listed on IDEAS

    as
    1. Anderson, James & Larch, Mario & Yotov, Yoto, 2015. "Growth and Trade with Frictions: A Structural Estimation Framework," School of Economics Working Paper Series 2015-2, LeBow College of Business, Drexel University.
    2. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    3. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-347, April.
    4. Eric Bond & Mario Crucini & Joel Rodrigue & Tristan Potter, 2013. "Misallocation and Productivity Effects of the Smoot-Hawley Tariff," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 120-134, January.
    5. Bresnahan, Timothy F. & Raff, Daniel M. G., 1991. "Intra-Industry Heterogeneity and the Great Depression: The American Motor Vehicles Industry, 1929–1935," The Journal of Economic History, Cambridge University Press, vol. 51(2), pages 317-331, June.
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    Cited by:

    1. Dong Cheng & Alyssa Trebino, 2021. "Early twentieth century American exceptionalism on wheels: the role of rapid automobile adoption in economic development," Letters in Spatial and Resource Sciences, Springer, vol. 14(2), pages 211-221, August.

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    More about this item

    Keywords

    Product Diffusion; Automobile; International Trade; Wedge Accounting;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • N60 - Economic History - - Manufacturing and Construction - - - General, International, or Comparative
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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