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Rent sharing in the multi-fibre arrangement : theory and evidence from US apparel imports from Hong Kong

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  • Erzan, Refik
  • Krishna, Kala
  • Ling Hui Tan

Abstract

Available estimates of tariff equivalents of quotas and welfare calculations on the costs of multi-fibre arrangements (MFA) 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 that administer the MFA quotas receive all the scarcity rents. The authors argue that, in the presence of market power on the buyers'side in the product markets combined with concentration in the license markets, the importing countries might retain part of this rent. Although the impact of imperfect competition on rent appropriation has been analyzed in literature, rent sharing has so far been ignored in both analytical and empirical work. This paper makes a theoretical case for rent sharing, and then analyzes U.S. imports of apparel products from Hong Kong. The authors find that rent sharing substantially affects the estimated magnitude of welfare losses that exporting developing countries suffer because of MFA quotas.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 597.

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Date of creation: 28 Feb 1991
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Handle: RePEc:wbk:wbrwps:597

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Keywords: Access to Markets; Markets and Market Access; Economic Theory&Research; Environmental Economics&Policies; Health Economics&Finance;

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References

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  1. Kala Krishna & Kathleen Hogan & Phillip Swagel, 1989. "The Non-Optimality of Optimal Trade Policy: The U.S. Automobile Indust ry Revisited, 1979-1985," NBER Working Papers 3118, National Bureau of Economic Research, Inc.
  2. Hamilton, Carl, 1986. "An Assessment of Voluntary Restraints on Hong Kong Exports to Europe and the USA," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 53(211), pages 339-50, August.
  3. 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, Canadian Economics Association, vol. 12(3), pages 439-49, August.
  4. Kala Krishna, 1985. "Tariffs vs. Quotas with Endogenous Quality," NBER Working Papers 1535, National Bureau of Economic Research, Inc.
  5. Irene Trela & John Whalley, 1988. "Do Developing Countries Lose From the MFA?," NBER Working Papers 2618, National Bureau of Economic Research, Inc.
  6. Richard E. Baldwin & Paul Krugman, 1986. "Market Access and International Competition: A Simulation Study of 16K Random Access Memories," NBER Working Papers 1936, National Bureau of Economic Research, Inc.
  7. Kala Krishna, 1988. "The Case of the Vanishing Revenues: Auction Quotas With Oligopoly," NBER Working Papers 2723, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Jarvis, Lovell S., 2003. "How Brazil Transferred Billions To Foreign Coffee Importers: The International Coffee Agreement, Rent Seeking And Export Tax Rebates," Working Papers, University of California, Davis, Department of Agricultural and Resource Economics 11967, University of California, Davis, Department of Agricultural and Resource Economics.
  2. Hertel, Thomas W. & Bach, Christian F. & Dimaranan, Betina & Martin, Will, 1996. "Growth, globalization, and gains from the Uruguay Round," Policy Research Working Paper Series 1614, The World Bank.
  3. Silva, Peri, 2011. "The role of importers and exporters in the determination of the U.S. tariff preferences granted to Latin America," Journal of Development Economics, Elsevier, Elsevier, vol. 94(2), pages 207-219, March.
  4. Erzan, Refik & Holmes, Christopher, 1992. "The restrictiveness of the multi-fibre arrangement on Eastern European trade," Policy Research Working Paper Series 860, The World Bank.
  5. Anderson, James E., 1997. "Revenue Neutral Trade Reform with Many Households, Quotas and Tariffs," Seminar Papers, Stockholm University, Institute for International Economic Studies 626, Stockholm University, Institute for International Economic Studies.
  6. Faini, R. & Melo, J. de & Takacs, W., 1992. "A Primer on the MFA Maze," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 92.15, Institut d'Economie et Econométrie, Université de Genève.
  7. Anderson, James E, 2002. "Trade Reform Diagnostics with Many Households, Quotas, and Tariffs," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 215-36, May.
  8. Krishna, Kala & Martin, Will & Tan, Ling Hui, 1997. "Imputing license prices: limitations of a cost-based approach," Journal of Development Economics, Elsevier, Elsevier, vol. 52(2), pages 355-374, April.
  9. Kenneth Hanson & Kenneth Reinert, 1997. "The Distributional Effects of U.S. Textile and Apparel Protection," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(3), pages 1-12.
  10. Bannister, Geoffrey J., 1993. "Rent-sharing in the multi-fibre arrangement : the case of Mexico," Policy Research Working Paper Series 1191, The World Bank.
  11. Geoffrey Bannister, 1994. "Rent sharing in the multi-fibre arrangement: The case of Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 130(4), pages 800-827, December.
  12. Lahiri, Sajal & Raimondos, Pascalis, 1995. "Welfare effects of aid under quantitative trade restrictions," Journal of International Economics, Elsevier, Elsevier, vol. 39(3-4), pages 297-315, November.
  13. Montfort Mlachila & Yongzheng Yang, 2004. "The End of Textiles Quotas," IMF Working Papers 04/108, International Monetary Fund.
  14. Meenu Tiwari, 2006. "The Role of Price and cost Competitiveness in Apparel Exports, post MFA: A Review," Working Papers id:485, eSocialSciences.

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