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Voluntary export restraints and resource allocation in exporting countries (English)

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  • Voluntary export restraints and resource allocation in exporting countries (English)
  • de Melo, Jaime; Winters, L. Alan
  • World Bank (WB)


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Title Voluntary export restraints and resource allocation in exporting countries (English)
Similar Titles
Material Type Articles
Author(English)

de Melo, Jaime; Winters, L. Alan

Publisher

World Bank (WB)

Date 1990
Language English
File Type Link
Subject Economy < Macroeconomics

Abstract

This article analyzes the resource implications of voluntary export restraints (VERs) for exporting countries. A simple analytical method is used to demonstrate that, by reducing the marginal revenue of its factors of production, a VER causes an industry in the exporting country to contract, and that the efficiency losses from a VER depend on the ease with which sales can be diverted from the restricted toward the unrestricted markets. The method is applied to test the effects of the U.S. Orderly Marketing Agreement (OMA) for producers of leather footware in the Republic of Korea during the period 1977-81. The authors estimate that the marginal revenue product of factors employed in leather footwear declined by as much as 9 percent because of the OMA, an estimate that is corroborated by inspection of time series on output, employment, and wages of the Korean footwear sector. This implies that there was pressure on the Korean footware industry to contract as a result of the OMA.