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

Abstract

This paper curates historical data on the quantity and unit value of automobiles exported from the United States to 23 destination countries along with natural and official barriers relevant to automobiles to account for the 46:1 automobile adoption gap between the US and the median country by 1929. For the median destination country, the export markup, tariff, and shipping cost are each roughly 20% ad-valorem-equivalent distortions, the retail distribution wedge is about 30%, and the foreign user cost wedge (based on gasoline taxes) is above 100%. Eliminating these price wedges and income differences relative to the US is shown to account for over 80% of the adoption gap. The estimated reduced-form adoption model accounts for much of the time series variation with relative price declines and income growth driving US and global adoption upward over time and the Great Depression reversing some of these gains at roughly constant relative prices.