Can a Periodic VER Raise Import i n g C o u n t ry We l f a re ?

Gokcekus, Omer; Tower, Edward

doi:1997.12.4.485

The Journal of Economic Integration 1997 December;12(4) :485-504.
DOI: https://doi.org/10.11130/jei.1997.12.4.485

Can a Periodic VER Raise Import i n g C o u n t ry We l f a re ?

Omer Gokcekus, Edward Tower,

North Carolina Central University
Duke University and University of Auckland

ABSTRACT

Several authors have argued that if exporting firms anticipate a voluntary export restriction in a future period, and they expect VERs to be allocated in proportion to past exports, then they have an incentive to dump in the earlier period. In this paper we ask: How does a regime characterized by periodic VERs affect aggregate welfare, consumer welfare and import-competing producer welfare in the importing country? We discover paradoxically, that the answers are all uncertain. However, such a regime always shrinks worldwide efficiency, and normally, for the importer it shrinks aggregate welfare and consumer welfare and raises producer welfare. (JEL Classification: F 1 3 )

REFERENCE

1.	Feldman, D. H. and E. Tower [1986], "The Welfare Economies of an Unstable Real Exchange Rate," Southern Economic Journal; pp. 607-616.

2.	Dean, J. [1996], "Do VERs Promote Dumping?" Working Paper, School for Advanced International Studies, Johns Hopkins University.