Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223271
Authors: 
Blundell, Richard W.
Gu, Ran
Leth-Petersen, Søren
Low, Hamish
Meghir, Costas
Year of Publication: 
2019
Series/Report no.: 
IFS Working Papers No. W19/27
Abstract: 
We specify an equilibrium model of car ownership with private information where individuals sell and purchase new and second-hand cars over their life-cycle. Private information induces a transaction cost and distorts the market reducing the value of a car as a savings instrument. We estimate the model using data on car ownership in Denmark, linked to register data. The lemons penalty is estimated to be 18% of the price in the first year of ownership, declining with the length of ownership. It leads to large reductions in the turnover of cars and in the probability of downgrading at job loss.
Subjects: 
Lemons penalty
car market
estimated life-cycle equilibrium model
JEL: 
D15
D82
E21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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