Trade frictions in durable goods markets drive household consumption patterns.
The paper investigates how trade barriers in durable goods markets affect household spending habits. By creating a model with households buying both durable and nondurable goods, the study shows that the inability to rent or resell durable goods after purchase plays a significant role in shaping consumption patterns. The research reveals that trade frictions are essential in explaining why people spend more on durable goods when their income changes and why the variability in spending on durable goods is much higher than on nondurable goods.