The international trade in automobiles: Explaining short-run changes in the import share of the United States market, 1979–1981

This paper examines the underlying causes for the rapid rise of the import share of the U.S. automobile market in the 1979 to 1981 time frame. Using data on the import share by state for the 1975–1979 period, a logit model is developed explaining movements in the import share. The principal purpose is to demonstrate that the rapid growth of the import share was due to a unique set of short-run factors such as constrained U.S. small car production capacity and exceptional consumer preference for fuel efficient automobiles. The sensitivity of the import share to changes in different factors is examined. The article concludes that U.S. policy makers concerned with the long-run viability of the U.S. automobile industry should discriminate between changes in import penetration caused by short-run factors and those caused by a secular deterioration of the U.S. comparative advantage in automobile production.