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

Elias Dinopoulos and Mordechai Kreinin

The Review of Economics and Statistics, 1988, vol. 70, issue 3, 484-91

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.

Date: 1988
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The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

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