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Voluntary Export Restraints, Dumping and Excess Capacity

Roberto Marchionatti and Stefano Usai ()

The Manchester School of Economic & Social Studies, 1997, vol. 65, issue 5, 499-512

Abstract: This paper is a variation on Anderson (1992), who asserts that the prospect of VER protection, inducing firms to dump, can create further protection. Anderson's model, however, seems unable to explain some stylised facts concerning the VER-regulated trade in textile and clothing. The authors' aim is to account for such stylised facts through the introduction of a cost of excess productive capacity attributed to dumping actions. This allows one to describe a new chain of effects related to dumping and VER: the incentive to dump, induced by the expectation of a VER, can generate the creation of productive excess capacity in the present period, which in turn can increase the incentive to dump in the future. Copyright 1997 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1997
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