Rent Sharing In The Multi-Fibre Arrangement: Theory And Evidence From Us Apparel Imports From Hong Kong
AbstractAvailable estimates of tariff equivalents of quotas and welfare calculations on the costs of MFA quotas for developing countries are based on the premise of perfect competition in both product and license markets. It is also assumed that the exporting countries which administer the MFA quotas receive all the scarcity rent. We argue that in the presence of market power on the buyers' side in the product market combined with concentration in the license markets, the importing countries may retain part of this rent, i.e. share it with the exporters. We analyze US imports of apparel products from Hong Kong to see if the data conform with all the relevant predictions of the competitive model. Our method essentially tests whether the license price inclusive Hong Kong price, adjusted for tariffs and transport costs, is equal to the domestic (US) price. A deviation between the two prices is taken to indicate rent sharing. We test the hypothesis with homogeneous goods, modify it to take into account compositional differences and, finally, consider differentiated goods. We find evidence that importers retain a substantial portion of the MFA quota rents.
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Bibliographic InfoPaper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1549.
Length: 32 pages
Date of creation: 1991
Date of revision:
competition ; tariffs ; prices ; transport;
Other versions of this item:
- Krishna, Kala & Erzan, Refik & Tan, Ling Hui, 1994. "Rent Sharing in the Multi-fibre Arrangement: Theory and Evidence from U.S. Apparel Imports from Hong Kong," Review of International Economics, Wiley Blackwell, vol. 2(1), pages 62-73, February.
- Kala Krishna & Refik Erzan & Ling Hui Tan, 1991. "Rent Sharing in the Multi-Fibre Arrangement: Theory and Evidence from US Apparel Imports from Hong Kong," NBER Working Papers 3673, National Bureau of Economic Research, Inc.
- Erzan, Refik & Krishna, Kala & Ling Hui Tan, 1991. "Rent sharing in the multi-fibre arrangement : theory and evidence from US apparel imports from Hong Kong," Policy Research Working Paper Series 597, The World Bank.
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