Tariffs vs. Quotas with Endogenous Quality
AbstractThis paper analyzes some aspects of the effects of trade restrictions (such as tariffs, quotas and quality controls) and their desirability when the quantity of the imported good is endogenous, and the foreign producer is a monopolist. It uses a fairly general model based on the work of Spence and Sheshinski. A crucial determinant of the direction of these effects is shown to be the valuation of increments in quality by marginal consumers,relative to that of all consumers on average. A way of comparing infinitesimal equivalent policies is developed and used to compare import equivalent policies. For reasonable characterizations of demand - tariffs are shown to dominate quotas on the basis of their revenue effects alone, while quotas are shown to dominate tariffs on the basis of their quality effects alone. Also, quality controls are shown to dominate both tariffs and quotas on the basis of revenue effects alone for reasonable characterizations of demand. Some special cases are also analyzed, including the case where demand is modelled along the lines of Swan - and only services of the good produced matter to consumers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1535.
Date of creation: Mar 1988
Date of revision:
Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-94, December.
- Kala Krishna, 1985.
"Protection and the Product Line: Monopoly and Product Quality,"
NBER Working Papers
1537, National Bureau of Economic Research, Inc.
- Krishna, Kala, 1990. "Protection and the Product Line: Monopoly and Product Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 87-102, February.
- Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-37, May.
- Carlos Alfredo Rodriguez, 1979. "The Quality of Imports and the Differential Welfare Effects of Tariffs, Quotas, and Quality Controls as Protective Devices," Canadian Journal of Economics, Canadian Economics Association, vol. 12(3), pages 439-49, August.
- Kala Krishna, 1989. "What Do Voluntary Export Restraints Do?," NBER Working Papers 2612, National Bureau of Economic Research, Inc.
- Stefan Lutz, 2005. "The Effect of Quotas on Domestic Product Price and Quality," International Advances in Economic Research, Springer, vol. 11(2), pages 163-173, May.
- Werner Smolny, 2003. "Determinants of innovation behaviour and investment estimates for west-german manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(5), pages 449-463.
- Zhou, Dongsheng & Spencer, Barbara J. & Vertinsky, Ilan, 2002.
"Strategic trade policy with endogenous choice of quality and asymmetric costs,"
Journal of International Economics,
Elsevier, vol. 56(1), pages 205-232, January.
- Dongsheng Zhou & Barbara J. Spencer & Ilan Vertinsky, 2000. "Strategic Trade Policy with Endogenous Choice of Quality and Asymmetric Costs," NBER Working Papers 7536, National Bureau of Economic Research, Inc.
- Kala Krishna, 1990. "Export Restraints With Imperfect Competition: A Selective Survey," NBER Working Papers 3244, National Bureau of Economic Research, Inc.
- Lutz, Stefan, 2002.
"The effects of quotas on vertical intra-industry trade,"
ZEI Working Papers
B 24-2002, ZEI - Center for European Integration Studies, University of Bonn.
- Lutz, Stefan H., 2002. "The Effects of Quotas on Vertical Intra-Industry Trade," ZEW Discussion Papers 02-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- 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.
- 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.
- Krishna, K. & Erzan, R. & Tan, L.H., 1991. "Rent Sharing In The Multi-Fibre Arrangement: Theory And Evidence From Us Apparel Imports From Hong Kong," Harvard Institute of Economic Research Working Papers 1549, Harvard - Institute of Economic Research.
- 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.
- Larue, Bruno & Gervais, Jean-Philippe, 1996. "The Impact Of The Canada-U.S. Hog/Pork Trade Dispute On The Composition Of U.S. Pork Imports," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 25(2), October.
- Rajat Acharyya & Swapnendu Banerjee, 2005. "On Tariff, Quality Choice and Innovation in a Vertically Differentiated Monopoly with Discrete Preferences," Departmental Working Papers wp0504, National University of Singapore, Department of Economics.
- Luca Lambertini, 1995. "Intraindustry Trade Under Vertical Product Differentiation," Working Papers 233, Dipartimento Scienze Economiche, Universita' di Bologna.
- Robert C. Feenstra, 1993. "Measuring the Welfare Effect of Quality Change: Theory and Application of Japanese Autos," NBER Working Papers 4401, National Bureau of Economic Research, Inc.
- S Lutz, 2005. "Can a Tariff on Foreign Competition Harm the Domestic Industry?," The School of Economics Discussion Paper Series 0510, Economics, The University of Manchester.
- Randi Boorstein & Robert C. Feenstra, 1987. "Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74," NBER Working Papers 2452, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.