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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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Author Info
Erzan, Refik
Krishna, Kala
Ling Hui Tan

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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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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 listed on IDEAS
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. 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. [Downloadable!] (restricted)
  2. Kala Krishna, 1988. "Tariffs vs. Quotas with Endogenous Quality," NBER Working Papers 1535, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  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, vol. 12(3), pages 439-49, August. [Downloadable!] (restricted)
  4. Irene Trela & John Whalley, 1988. "Do Developing Countries Lose From the MFA?," NBER Working Papers 2618, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. 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, vol. 53(211), pages 339-50, August. [Downloadable!] (restricted)
  6. Kala Krishna, 1988. "The Case of the Vanishing Revenues: Auction Quotas With Oligopoly," NBER Working Papers 2723, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(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. Meenu Tewari, 2006. "Is Price and Cost Competitiveness Enough for Apparel Firms to Gain Market Share in the World after Quotas? A Review," Global Economy Journal, Berkeley Electronic Press, vol. 6(4). [Downloadable!]
  2. Geoffrey Bannister, 1994. "Rent sharing in the multi-fibre arrangement: The case of Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(4), pages 800-827, December. [Downloadable!] (restricted)
  3. Yongzheng Yang & Montfort Mlachila, 2004. "The End of Textiles Quotas: A Case Study of the Impact on Bangladesh," IMF Working Papers 04/108, International Monetary Fund. [Downloadable!]
  4. Meenu Tewari, 2005. "The Role of Price and Cost Competitiveness in Apparel Exports, Post-MFA: A Review," Indian Council for Research on International Economic Relations, New Delhi Working Papers 173, Indian Council for Research on International Economic Relations, New Delhi, India. [Downloadable!]
  5. Jarvis, Lovell S., 2003. "How Brazil Transferred Billions To Foreign Coffee Importers: The International Coffee Agreement, Rent Seeking And Export Tax Rebates," Working Papers 11967, University of California, Davis, Department of Agricultural and Resource Economics. [Downloadable!]
  6. Faini, Riccardo & de Melo, Jaime & Takacs, Wendy, 1993. "A primer on the MFA maze," Policy Research Working Paper Series 1088, The World Bank. [Downloadable!]
    Other versions:
  7. Meenu Tiwari, 2006. "The Role of Price and cost Competitiveness in Apparel Exports, post MFA: A Review," Working Papers id:485, esocialsciences.com. [Downloadable!]
  8. Anderson, James E., 1997. "Revenue Neutral Trade Reform with Many Households, Quotas and Tariffs," Seminar Papers 626, Stockholm University, Institute for International Economic Studies. [Downloadable!]
    Other versions:
  9. James E. Anderson, 1999. "Trade Reform Diagnostics with Many Households, Quotas, and Tariffs," Boston College Working Papers in Economics 417, Boston College Department of Economics, revised 03 May 2000. [Downloadable!]
    Other versions:
  10. 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. [Downloadable!]
  11. Bannister, Geoffrey J., 1993. "Rent-sharing in the multi-fibre arrangement : the case of Mexico," Policy Research Working Paper Series 1191, The World Bank. [Downloadable!]
  12. 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. [Downloadable!]
  13. Kenneth A. Hanson & Kenneth A. Reinert, 1997. "The Distributional Effects Of U.S. Textile And Apparel Protection," International Economic Journal, Korean International Economic Association, vol. 11(3), pages 1-12, October. [Downloadable!] (restricted)
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