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Trade Liberalization and Domestic Monopoly: A Welfare Analysis

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  • Eldor, Rafael
  • Levin, Dan

Abstract

This paper uses a partial equilibrium analysis to show that a partial trade liberalization may reduce a country's welfare due to a loss in monopolistic rent if it is carried out by a quota. The quota can be set by either the foreign or domestic government (it is considered as a voluntary export restraint if it is set by the foreign government). The quota rents in the case of a voluntary export restraint are captured by the foreign agent. Therefore, the reduction in the domestic country's welfare is more likely in this case rather than in the case of the quota set by the domestic government. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Eldor, Rafael & Levin, Dan, 1990. "Trade Liberalization and Domestic Monopoly: A Welfare Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(4), pages 773-782, November.
    • Handle: RePEc:ier:iecrev:v:31:y:1990:i:4:p:773-82
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    Cited by:

    1. Makoto Okamura & Koichi Futagami, 1998. "A national-security argument for trade protection," Journal of Economics, Springer, vol. 68(1), pages 39-52, February.
    2. Mujumdar, Sudesh, 2004. "Revenue implications of trade liberalization under imperfect competition," Economics Letters, Elsevier, vol. 82(1), pages 83-89, January.
    3. Ning, Haokai, 2020. "On the Equivalence of Tariffs and Quotas with Incomplete Information," MPRA Paper 101512, University Library of Munich, Germany.
    4. Haixiao Huang, Walter C. Labys, 2002. "Environment and trade: a review of issues and methods," International Journal of Global Environmental Issues, Inderscience Enterprises Ltd, vol. 2(1/2), pages 100-160.
    5. Aditya Bhattacharjea, 2001. "Import Quotas, Export Promotion and Intra-Industry Trade," Working papers 96, Centre for Development Economics, Delhi School of Economics.
    6. Pasi Holm, 1995. "Alcohol policy harmonization and trade liberalization in the Nordic countries," Finnish Economic Papers, Finnish Economic Association, vol. 8(1), pages 17-24, Spring.

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