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Voluntary export restraints and resource allocation in exporting countries

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  • de Melo, Jaime
  • Winters, L. Alan

Abstract

Most literature on voluntary export restraints ( VERs ) analyzes the welfare costs of VERs to consumers in the importing country. The authors propose a method for measuring the effects of a VER on the productivity of factors employed in the exporting industry. Their model measures how a VER affects both revenues and efficiency in an exporting industry. They used the model to estimate the effects of the U.S. Orderly Marketing Agreement ( OMA ) on Korean producers of leather footwear ( 1977 - 81 ). Their econometric estimates indicate a limited ability to redirect sales to unrestricted markets and a sharp fall in the marginal revenue during the period the OMA was in effect. They found that the marginal revenue product of factors employed in leather footwear declined as much as 9 percent because of OMA. Based on illustrative counterfactual simulations, the authors show that a VER is likely to produce a welfare loss if demand is relatively elastic and supply is not.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 352.

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Date of creation: 30 Apr 1990
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Handle: RePEc:wbk:wbrwps:352

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Keywords: Economic Theory&Research; Environmental Economics&Policies; Access to Markets; Markets and Market Access; Banks&Banking Reform;

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  1. Aigner, Dennis J. & Hsiao, Cheng & Kapteyn, Arie & Wansbeek, Tom, 1984. "Latent variable models in econometrics," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 23, pages 1321-1393 Elsevier.
  2. Hickman, Bert G. & Lau, Lawrence J., 1973. "Elasticities of substitution and export demands in a world trade model," European Economic Review, Elsevier, vol. 4(4), pages 347-380, December.
  3. Trela, I. & Whalley, J., 1988. "Do Developing Countries Lose From The Mfa?," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 8804c, University of Western Ontario, The Centre for the Study of International Economic Relations.
  4. Tarr, David G, 1987. "Effects of Restraining Steel Exports from the Republic of Korea and Other Countries to the United States and the European Economic Community," World Bank Economic Review, World Bank Group, vol. 1(3), pages 397-418, May.
  5. Bark, Taeho & de Melo, Jaime, 1988. "Export quota allocations, export earnings and market diversifications," Policy Research Working Paper Series 89, The World Bank.
  6. 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.
  7. Neary, J.P & Roberts, K.W.S, 1978. "The Theory of Household Behaviour under Rationing," The Warwick Economics Research Paper Series (TWERPS) 132, University of Warwick, Department of Economics.
  8. Nogues, Julio J & Olechowski, Andrzej & Winters, L Alan, 1986. "The Extent of Nontariff Barriers to Industrial Countries' Imports," World Bank Economic Review, World Bank Group, vol. 1(1), pages 181-99, September.
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