Thomas J. Prusa () (Rutgers University) Dobrin Kolev () (Mitchell Madison Group)
Abstract
We argue that the rise of antidumping protection and the proliferation of voluntary export restraints are fundamentally inter-related. We show that both can be explained by a cost-based definition of dumping when the domestic government has incomplete information about the foreign firm's costs. Given that its costs are only imperfectly observed and knowing the government's desire to offer greater protection against competitively priced imports, efficient foreign firms will voluntarily restrains their exports prior to the antidumping investigation. In turn, the VER distorts the government's perception of the foreign firm's efficiency and often leads to undesirably high duties regardless of the foreign firm's efficiency. The clumsy way that duties are levied benefits domestic firms, which explains the popularity of cost-based complaints.
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Publisher Info
Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number
199901.
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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