Prague Economic Papers 2011, 20(3):216-231 | DOI: 10.18267/j.pep.397

Who Bears the Burden of Voluntary Export Restraints?

Fuhmei Wang
Department of Economics, National Cheng Kung University, Tainan, 701 Taiwan, R.O.C. (fmwang@mail.ncku.edu.tw).

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.

Keywords: voluntary export restraints, welfare effects, country sizes
JEL classification: F12, F13, F23

Published: January 1, 2011  Show citation

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Wang, F. (2011). Who Bears the Burden of Voluntary Export Restraints? Prague Economic Papers, 20(3), 216-231. doi: 10.18267/j.pep.397
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