IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

The economic impact of export controls : an application to Mongolian cashmere and Romanian wood products

Listed author(s):
  • Takacs, Wendy E.

Countries sometimes use export controls on raw materials to encourage domestic processing. The motivation is usually to assure raw materials at low prices for domestic industries, although exports are sometimes controlled in an attempt to increase export earnings (by promoting exports of higher value-added processed goods rather than raw materials). The problem is, export controls hurt raw material producers and cause economic distortions that result in net losses to the country. The impact of raw material export controls on total export earnings is ambiguous: the decline in raw material export when production is discouraged by lower prices may outweigh the effect of increased exports of processed goods. The author develops a simple partial equilibrium model of export controls on raw material to investigate the impact of export restrictions and to estimate the potential magnitude of the transfers between groups and the net costs of the export-control regimes. The author's estimates of the magnitude of transfers and costs of export controls on raw cashmere (in Mongolia) and wood production (in Romania) indicate that the transfers and costs may be substantial. The author finds that (under reasonable assumptions about elasticities of supply) export controls can transfer significant profits from the raw materials producers to the processing industries, causing significant net losses to the economy and a substantial net decrease in export earnings. Quantitative export controls will be even more distortive if processing industries have any monopsony (single-buyers) power. This is quite likely in developing countries with small industrial bases - or in economies in transition, where central planning has left a legacy of very large firms in highly concentrated industries. With monopsony power in the processing industry, both output and exports of final products can be reduced by quantitative export controls on raw material inputs. The quantitative control bestows effective monopsony power on the processing firm and encourages it to exploit this monopsony power by reducing output. If the raw materials could be freely exported, processors would not be able to effectively exercise monopsony power.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1280.

in new window

Date of creation: 31 Mar 1994
Handle: RePEc:wbk:wbrwps:1280
Contact details of provider: Postal:
1818 H Street, N.W., Washington, DC 20433

Phone: (202) 477-1234
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1280. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.