Financing Durable Assets

Rampini, Adriano A.

doi:10.1257/aer.20170995

Cited by 45 publications

(37 citation statements)

References 62 publications

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“…4 Vehicle purchases in particular seem to follow from substantial increases in household liquidity, as caused by cash stimulus payments (Parker et al 2013), minimum wage hikes (Aaronson, Agarwal, and French 2012), and tax refunds (Adams, Einav, and Levin 2009). The model in Rampini (2019) highlights the relevance of liquidity constraints for purchase of goods with high durability, such as new vehicles. Around the time of the CARS program, automobile purchases were also sensitive to credit supply (Benmelech, Meisenzahl, and Ramcharan 2017).…”

Section: Related Literaturementioning

confidence: 99%

Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand

Green¹,

Melzer

Parker

et al. 2020

American Economic Journal: Economic Policy

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This paper evaluates the Car Allowance Rebate System (CARS ) by comparing the vehicle purchases and disposals of households with eligible “clunkers” to those of households with similar but ineligible vehicles. CARS caused roughly 500,000 purchases during the program period. The provision of liquidity, through a rebate usable as a down payment, was critical in generating this large response. Participation was rare among households that owned clunkers with outstanding loans, which required loan repayment. This decline in participation is attributed to households’ preference for lower down payments and distinguished from the effects of income, other indebtedness, and the program subsidy. (JEL E23, E62, G51, H24, H31)

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Section: Related Literaturementioning

confidence: 99%

Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand

Green¹,

Melzer

Parker

et al. 2020

American Economic Journal: Economic Policy

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show abstract

“…Finally, our mechanism of delayed upgrading of durable goods during the Great Recession is consistent with the concurrent analysis of Dupor et al (2018), who study the effect of households' income expectations on their car purchases during the Great Recession, and with the evidence 6. Our article is also related to Adda and Cooper (2006), who empirically study the aggregate dynamics of car sales; Oh (2019), who studies durable replacement and second-hand markets in a representative-agent business-cycle model; Rampini (2019), who analyses how durability affects durable-goods financing in a model with collateral constraints; and Chafwehé (2017), who considers secondary markets for durables in a stationary partial-equilibrium model with incomplete markets.…”

Section: Related Literaturementioning

confidence: 99%

Credit Shocks and Equilibrium Dynamics in Consumer Durable Goods Markets

Gavazza

Lanteri

2018

SSRN Journal

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This article studies equilibrium dynamics in consumer durable goods markets after aggregate credit shocks. We introduce two novel features into a general-equilibrium model of durable consumption with heterogeneous households facing idiosyncratic income risk and borrowing constraints: (1) indivisible durable goods are vertically differentiated in their quality and (2) trade on secondary markets at marketclearing prices, with households endogenously choosing when to trade or scrap their durables. The model highlights a new transmission mechanism for macroeconomic shocks and successfully matches several empirical patterns that we document using data on U.S. car markets around the Great Recession. After a tightening of the borrowing limit, debt-constrained households postpone the decision to scrap and upgrade their low-quality cars, which depresses mid-quality car prices. In turn, this effect reduces wealthy households' incentives to replace their mid-quality cars with high-quality ones, thereby decreasing new-car sales. We further use our framework to evaluate targeted fiscal stimulus policies such as the Car Allowance Rebate System in 2009 ("Cash for Clunkers").

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“…We are not the first to focus on rental markets for capital or on the role of clusters for productive efficiency. On rental markets, Rampini (2019) discusses the role of renting in a model of financing for durable assets, and Rampini and Townsend (2016) bring evidence from Thai households. In work contemporaneous to ours, Caunedo et al (2020) and Caunedo and Kala (2021) study the role of rental markets for mechanization in agriculture in India.…”

Section: Introductionmentioning

confidence: 99%

Achieving Scale Collectively

Bassi

Muoio²,

Porzio

et al. 2020

SSRN Journal

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This paper argues that rental market interactions allow small firms to increase their effective scale and mechanize production, even when each individual firm would be too small to invest in expensive machines. We conduct a novel survey of manufacturing firms in Uganda, which uncovers an active rental market for large machines between small firms in informal clusters. We then build an equilibrium model of firm behavior and estimate it with our data. Our results show that the rental market is quantitatively important for mechanization and productivity since it provides a workaround for other market imperfections that keep firms small. We also show that the rental market shapes the effectiveness of policies to foster mechanization, such as subsidies to purchase machines.

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Financing Durable Assets

Cited by 45 publications

References 62 publications

Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand

Accelerator or Brake? Cash for Clunkers, Household Liquidity, and Aggregate Demand

Credit Shocks and Equilibrium Dynamics in Consumer Durable Goods Markets

Achieving Scale Collectively

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