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Effects on the U.S.-Japan Auto VER on European Prices and on U.S. Welfare

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  • Dinopoulos, Elias
  • Kreinin, Mordechai E

Abstract

This paper highlights the impact of voluntary export restrictions (VERs) on the nonrestricted supplier by investigating the effect of the U.S.-Japan auto VER on the behavior of European producers. Using three independent approaches (supply functions, hedonic regressions, and casual evidence), it shows that European producers raised prices by nearly one third. U.S. welfare loss to Europe ($3.4 billion in 1984) actually exceeded its loss to Japan ($2.4 billion), and the small social loss within the United States. Total annual cost of a job saved in the industry was $181,000. Copyright 1988 by MIT Press.

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  • Dinopoulos, Elias & Kreinin, Mordechai E, 1988. "Effects on the U.S.-Japan Auto VER on European Prices and on U.S. Welfare," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 484-491, August.
    • Handle: RePEc:tpr:restat:v:70:y:1988:i:3:p:484-91
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    Cited by:

    1. Zhe Chen & Zhongzhong Hu & Kai Li, 2021. "The spillover effect of trade policy along the value Chain: Evidence from China's rare earth‐related sectors," The World Economy, Wiley Blackwell, vol. 44(12), pages 3550-3582, December.
    2. Jaime de Melo & David Tarr, 2015. "VERs under imperfect competition and foreign direct investment: A case study of the US–Japan auto VER," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 22, pages 461-483, World Scientific Publishing Co. Pte. Ltd..
    3. Caixia Shen & Yanfei Wang & Junji Xiao & Xiaolan Zhou, 2021. "Comparison Between Uniform Tariff and Progressive Consumption Tax in the Chinese Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 169-213, March.
    4. Kala Krishna, 1990. "Export Restraints With Imperfect Competition: A Selective Survey," NBER Working Papers 3244, National Bureau of Economic Research, Inc.
    5. Douglas Nelson, 1996. "The Political Economy of U.S. Automobile Protection," NBER Chapters, in: The Political Economy of American Trade Policy, pages 133-196, National Bureau of Economic Research, Inc.
    6. de Melo, Jaime & Tarr, David, 1990. "Do wage distortions justify protection in the U.S. auto and steel industries?," Policy Research Working Paper Series 517, The World Bank.
    7. João Alberto De Negri & Celso Garrido & Vinicius Rodrigues Peçanha & Leonardo E. Stanley, 2010. "La inserción de América Latina en las cadenas globales de valor," Serie Red MERCOSUR, Red Mercosur, edition 1, volume 1, number 19 edited by Victor Prochnik (Coordinador), Spring.
    8. Elias Dinopoulos & Mordechai E. Kreinin, 1991. "The US VER on Machine Tools: Causes and Effects," NBER Chapters, in: Empirical Studies of Commercial Policy, pages 113-134, National Bureau of Economic Research, Inc.

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