The Black Market for Beijing License Plates
General Economics
2021-05-04 v1 Economics
Abstract
Black markets can reduce the effects of distortionary regulations by reallocating scarce resources toward consumers who value them most. The illegal nature of black markets, however, creates transaction costs that reduce the gains from trade. We take a partial identification approach to infer gains from trade and transaction costs in the black market for Beijing car license plates, which emerged following their recent rationing. We find that at least 11% of emitted license plates are illegally traded. The estimated transaction costs suggest severe market frictions: between 61% and 82% of the realized gains from trade are lost to transaction costs.
Keywords
Cite
@article{arxiv.2105.00517,
title = {The Black Market for Beijing License Plates},
author = {Øystein Daljord and Guillaume Pouliot and Junji Xiao and Mandy Hu},
journal= {arXiv preprint arXiv:2105.00517},
year = {2021}
}