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Import Quotas, Export Promotion and Intra-Industry Trade

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Author Info
Aditya Bhattacharjea (Delhi School of Economics)

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Abstract

Most existing models of protection-induced exports, as well as models of intra-industry trade (IIT), are based on imperfect competition in both the home and foreign countries, usually with increasing returns to scale. This paper shows how import quotas can induce exports and IIT in identical or vertically differentiated products, in a model where an oligopolistic domestic industry with increasing costs faces a competitive world market. It also derives welfare results that go beyond the earlier literature, and shows that relaxation of a voluntary export restraint (VER) can reduce welfare relative to autarky over a wide range, with or without IIT.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 96.

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Length: 32 pages
Date of creation: Aug 2001
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Handle: RePEc:cde:cdewps:96

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Related research
Keywords: Quotas; voluntary export restraints; export promotion; intra-industry trade; oligopoly.;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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  1. James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Krugman, Paul, 1995. "Increasing returns, imperfect competition and the positive theory of international trade," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 24, pages 1243-1277 Elsevier. [Downloadable!] (restricted)
  3. Buffie, Edward F. & Spiller, Pablo T., 1986. "Trade liberalization in oligopolistic industries : The quota case," Journal of International Economics, Elsevier, vol. 20(1-2), pages 65-81, February. [Downloadable!] (restricted)
  4. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  5. Bernhofen, Daniel M., 1999. "Intra-industry trade and strategic interaction: Theory and evidence," Journal of International Economics, Elsevier, vol. 47(1), pages 225-244, February. [Downloadable!] (restricted)
  6. Murray, Tracy & Turdaliev, Nurlan, 1999. "Universal Dumping of Homogeneous Products," Review of International Economics, Blackwell Publishing, vol. 7(4), pages 580-89, November.
  7. Seade, J, 1985. "Profitable Cost Increases and the Shifting of Taxation : Equilibrium Response of Markets in Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 260, University of Warwick, Department of Economics. [Downloadable!]
  8. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-26, March. [Downloadable!] (restricted)
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  9. Claudy Culem & Lars Lundberg, 1986. "The product pattern of intra-industry trade: Stability among countries and over time," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 122(1), pages 113-130, March. [Downloadable!] (restricted)
  10. Greenaway, David & Hine, Robert C & Milner, Chris, 1995. "Vertical and Horizontal Intra-industry Trade: A Cross Industry Analysis for the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(433), pages 1505-18, November. [Downloadable!] (restricted)
  11. Aditya Bhattacharjea, 2000. "Foreign Entry and Domestic Welfare: Can "Market Discipline" Be Excessive?," Working papers 83, Centre for Development Economics, Delhi School of Economics. [Downloadable!]
  12. Horn, Henrik & Levinsohn, James, 2001. "Merger Policies and Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 111(470), pages 244-76, April. [Downloadable!] (restricted)
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  13. Brander, James A. & Spencer, Barbara J., 1984. "Trade warfare: Tariffs and cartels," Journal of International Economics, Elsevier, vol. 16(3-4), pages 227-242, May. [Downloadable!] (restricted)
    Other versions:
  14. Martin Richardson, 1998. "Foreign entry and domestic welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 250-262, June. [Downloadable!] (restricted)
  15. Syropoulos, Constantinos, 1996. "On Pareto-improving voluntary export restraints," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 71-84. [Downloadable!] (restricted)
  16. Cunha, Luis Campos e & Santos, Vasco, 1996. "Sleeping quotas, pre-emptive quota bidding and monopoly power," Journal of International Economics, Elsevier, vol. 40(1-2), pages 127-148, February. [Downloadable!] (restricted)
  17. 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 773-82, November. [Downloadable!] (restricted)
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