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Quota Licenses for Imported Capital Equipment: Could Bureaucrats Ever DoBetter than the Market?

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  • Barbara J. Spencer

Abstract

Despite valid criticisms, many developing countries have issued non-transferable import licenses to a limited number of final-good producers so as to restrict imports of an input capital equipment. This paper demonstrates that for a given import quota, such licensing restrictions can actually increase domestic production of both the input and the final product, but at the cost of reduced quota rents. Under pure competition, domestic welfare falls relative to the use of marketable quota licenses, but if foreigners would get the quota rents, or if external economies cause decreasing costs, then bureaucratic allocation can dominate.

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  • Barbara J. Spencer, 1996. "Quota Licenses for Imported Capital Equipment: Could Bureaucrats Ever DoBetter than the Market?," NBER Working Papers 5695, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5695
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    Cited by:

    1. Eftichios Sartzetakis, 2004. "On the Efficiency of Competitive Markets for Emission Permits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(1), pages 1-19, January.
    2. Krishna Kala M & Tan Ling Hui & Ranjan Ram, 2004. "Quantity Controls, License Transferability, and the Level of Investment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-27, July.
    3. Boughner, Devry S. & de Gorter, Harry & Sheldon, Ian M., 2000. "The Economics of Two-Tier Tariff-Rate Import Quotas in Agriculture," Agricultural and Resource Economics Review, Cambridge University Press, vol. 29(1), pages 58-69, April.
    4. Shumei Gao & Jihe Song, 2004. "Quota Use under VERs: A theoretical framework and some evidence on MFA quota use," Working Papers E03, Department of Economics, School of Management and Languages, Heriot Watt University.

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    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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