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Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74

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Author Info
Randi Boorstein
Robert C. Feenstra

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Abstract

In this paper we measure the quality change which has occurred in U.S. steel imports during the 1969-74 VRA, using an index number method. Under this approach, the yearly changes in unit values is broken into three components: a quality-adjusted or pure price index; a quality index, which measures changes in the product mix; and a supplier index, which measures changes in the source of supply. We also derive a measure of welfare cost, which equals the inverse of a Paasche price index minus the inverse of an exact price index. Over the 1969-74 VRA period we find quality upgrading of 7.4 percent in U.S. steel imports, which occurs most strongly in the first year. The welfare cost of quality change varies around one percent of import expenditure during 1970-73. This cost is at least as large as the conventional deadweight loss triangle, but smaller than the transfer of quota rents.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2452.

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Date of creation: Dec 1987
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Handle: RePEc:nbr:nberwo:2452

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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.:

  1. Diewert, W. E., 1985. "A dynamic approach to the measurement of waste in an open economy," Journal of International Economics, Elsevier, vol. 19(3-4), pages 213-240, November. [Downloadable!] (restricted)
  2. Chinloy, Peter T, 1980. "Sources of Quality Change in Labor Input," American Economic Review, American Economic Association, vol. 70(1), pages 108-19, March. [Downloadable!] (restricted)
  3. Feenstra, Robert C, 1988. "Quality Change under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 131-46, February. [Downloadable!] (restricted)
  4. Diewert, W Erwin, 1983. " The Measurement of Waste within the Production Sector of an Open Economy," Scandinavian Journal of Economics, Blackwell Publishing, vol. 85(2), pages 159-79.
  5. Analysis, A Welfare & Das, Satya P. & Donnenfeld, Shabtai, 1987. "Trade policy and its impact on quality of imports," Journal of International Economics, Elsevier, vol. 23(1-2), pages 77-95, August. [Downloadable!] (restricted)
  6. Kala Krishna, 1988. "Tariffs vs. Quotas with Endogenous Quality," NBER Working Papers 1535, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789.
  8. Falvey, Rodney E, 1979. "The Composition of Trade within Import-restricted Product Categories," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1105-14, October. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. Kala Krishna, 1985. "Protection and the Product Line: Monopoly and Product Quality," NBER Working Papers 1537, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Feenstra, Robert C., 1985. "Automobile prices and protection: The U.S.-Japan trade restraint," Journal of Policy Modeling, Elsevier, vol. 7(1), pages 49-68. [Downloadable!] (restricted)
  12. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May. [Downloadable!] (restricted)
  13. Diamond, P. A. & McFadden, D. L., 1974. "Some uses of the expenditure function in public finance," Journal of Public Economics, Elsevier, vol. 3(1), pages 3-21, February. [Downloadable!] (restricted)
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(explanations, 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.)

  1. 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. [Downloadable!] (restricted)
  2. Katherine M. Sauer, 2008. "The quality of parallel imports," Economics Bulletin, Economics Bulletin, vol. 6(44), pages 1-10. [Downloadable!]
  3. James E. Anderson & J. Peter Neary, 1998. "The Mercantilist Index of Trade Policy," Working Papers 199813, School Of Economics, University College Dublin. [Downloadable!]
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