International Trade Theory in Vintage Models

New or used? Investment with credit constraints

“…These papers provide complementary support for the argument that firms use operating decisions, and not just capital structure decisions, to relax financial constraints. On the other hand, factor price variation has been used to understand trade in used capital across countries, where variation in such prices may be considerable, by Sen (1962) and Smith (1976). Our work is also related to studies of vintage capital, durable goods, and the effects of credit constraints on investment.…”

Gains from trade in used goods: Evidence from automobiles

“…The implication is that used machines should be exported from high-wage to low-wage countries. Based on this insight, Smith (1976) and Bond (1983) developed formal models incorporating trade in vintage models. Navaretti et al (2000) examined the determinants of used versus new machinery trade using data from U.S. exports of metalworking machine tools.…”

Quality standards for used durables: An indirect subsidy?

“…In the presence of different factor prices across countries, this will generate international trade in goods of different vintages: used machines will flow from countries with high labor costs to countries with low labor costs. Smith (1976) models this explicitly and analyzes the pattern of international trade in used machines and the gains from trade. In a similar framework Bond (1983) models depreciation as an increase in downtime which increases labor requirements as machines age and derives a measure of comparative advantage that explains trade patterns.…”