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Who Bears the Burden of Voluntary Export Restraints?

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  • Fuhmei Wang

Abstract

Conventional wisdom believes that voluntary export restraints (VERs) are beneficial for the exporting country but detrimental to the importing country. Based on the benchmark model of Obstfeld and Rogoff, this paper aims to examine this belief and evaluate the welfare effects of VERs on the world economy. Analytical results find that VERs exert expansion effects on the exporting economy temporarily. The conventional view of VERs effects holds only when there is perfect competition on the goods market or when the exporting country is bigger than the importing country. On the whole, VERs deteriorate the overall welfare of the world economy.

Suggested Citation

  • Fuhmei Wang, 2011. "Who Bears the Burden of Voluntary Export Restraints?," Prague Economic Papers, Prague University of Economics and Business, vol. 2011(3), pages 216-231.
    • Handle: RePEc:prg:jnlpep:v:2011:y:2011:i:3:id:397:p:216-231
    DOI: 10.18267/j.pep.397
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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