The Nonequivalence of Import and Export Quotas in Strategic Equilibrium

The authors use a standard general‐equilibrium trade model to show that export and import policies are not symmetric in the equilibrium of a strategic game with quotas. It is assumed that N (identical) large countries, without cooperation, set their import (or export) quotas to maximize domestic welfare. It is shown that the equilibrium in which all countries use import quotas differs from, and is superior to, the equilibrium in which countries use export quotas. The difference arises because the elasticity of the residual foreign export supply schedule differs between the two equilibria. The authors also study the properties of the sequential equilibrium of the game. In a simultaneous‐move game, each country is indifferent as to whether it uses an import or export quota, given the policy of the other country. However, in a sequential‐move game, the first mover will prefer to use an import quota rather than an export quota.     

EXPORT SUBSIDIES VERSUS EXPORT QUOTAS WITH INCOMPLETELY INFORMED POLICY MAKERS*

This paper analyses export subsidies (price incentives) and export quotas (quantity controls) in the Brander‐Spencer (1985) model when policy makers have limited information on demand and cost structures. We examine necessary or sufficient information for policy makers to determine welfare‐enhancing policies. It is crucial that they know the elasticity value of the slope of the inverse demand curve and the market share. It is also shown that for policy makers, export quotas are superior to export subsidies under certain conditions.     

Implications of a Discard Ban in Multispecies Quota Fisheries

We present an analysis of quota regulation and discarding in multispecies fisheries, explicitly taking into account the costs of non-compliance with quotas and a possible discard ban, as well as the costs of selective fishing (avoidance effort). We examine the impact of a discard ban on vessels’ profit maximising behaviour, in particular where species quotas are not set in proportion to their availability on the fishing grounds, considering both non-tradeable quotas and ITQs. We show the interdependence between penalty rates for both discards and over-quota landings in determining quota market outcomes. We find that quota prices are sensitive to penalty rates and to the presence of restrictive quotas for “choke” species.     

Uncertainty and Production Quotas

This paper examines the role of uncertainty in determining the impact of production quotas on a risk-neutral producer's behaviour
In the context of production uncertainty the introduction of a quota will lead to a reduction in planned production. Moreover, in a situation of an established quota, the level of planned production relative to the quota depends both on the size of the profit margin on quota production and on the extent of production uncertainty. Apart from these direct influences, uncertainty influences planned production indirectly in a situation where over-quota production can be sold in an uncertain export market. The direction of this influence depends on the relationship between the producer's uncertainties of price and production. It is argued, therefore, that the welfare assessment of the impact of production quotas must incorporate the role of uncertainty.     

Volume Quotas with Heterogeneous Product Categories*

Volume quotas on imports are an important part of assistance packages afforded a number of major industries in Australia. Generally, quota is allocated to importers free of charge, although recently a proportion of quota for some product groups has been sold by tender. In this paper we compare the effects of volume quotas applied to heterogeneous product groups when allocated free of charge, by full tender sale and by a combination offender sale and free allocation. The analysis is undertaken for both competitive markets and in the case where importers have some market power.     

Internal Quota-Allocation Schemes and the Costs of the Mfa*

This paper suggests that schemes used within developing countries to allocate textile export quota among domestic producers typically have more severe negative effects on developing-country economic performance than the MFA export quotas themselves. We summarize allocation schemes in 16 countries, highlighting common “lock-in” and “rent-dissipation” effects of such schemes. We then use a global general-equilibrium model to evaluate the effects of MFA removal with and without these additional effects. Results indicate that estimates of gains to developing countries from an MFA removal increase sharply when internal quota-allocation schemes are taken into account.     

On Functionally Distributed Quotas

We consider “functionally distributed” quotas, where trade is restricted to a function of another economic activity, paying special attention to the ratio constraint and its relation to “proportionally distributed” quotas. We propose a simple principle defining the optimal policy under a functionally defined restriction, extend the analysis of ratio import/production constraints to general equilibrium, introduce export constraints, and constraints defined in proportion to factor use. We develop the general‐equilibrium geometry of functional trade constraints and the concomitant optimal policies, deriving a “quota locus” that depicts the consumption possibilities under various regimes.     

Price Volatility and Risk Exposure: On the Interaction of Quota and Product Markets

We consider an industry with firms that produce a final good emitting pollution to different degree as a side effect. Pollution is regulated by a tradable quota system where some quotas may have been allocated at the outset, i.e. before the quota market is opened. We study how volatility in quota price affects firm behaviour, taking into account the impact of quota price on final-good price. The impact on the individual firm differs depending on how polluting it is??whether it is ??clean?? or ??dirty????and whether it has been allocated quotas at the outset. In the absence of long-term or forward contracting, a grandfathering regime??where clean firms are allocated no quotas and dirty firms are allocated quotas for a part of their emissions??minimizes the impact on firm behavior relative to a risk-neutral benchmark.With forward contracts and in the absence of wealth effects initial quota allocation has no effect on firm behaviour. Allowing for abatement does not change the qualitative nature of our results.     

Import sensitive products and perverse tariff‐rate quota liberalization

Abstract This paper shows that a Tariff‐Rate‐Quota's (TRQ) minimum access expansion can perversely trigger domestic price increases. Often, TRQs have prohibitive over‐quota tariffs to mimic import quotas in providing minimum market access. In the WTO's Doha Round, it is likely that countries using TRQs will avoid aggressive tariff reductions if they increase the quota portion of TRQs. We show that when the import price lies between the unit cost of production and the price received by domestic upstream firms, an increase in import quota as a share of domestic production may cause an increase in the domestic retail price.     

When is fish quota enforcement worth while? A study of the Northeast Arctic cod

Many fish stocks are controlled by fish quotas divided among individual firms. Such quota regimes need an enforcement mechanism in order to be effective. Whether or not quota management regimes are worth while depends on whether the rents generated by such regimes cover their costs. Cost-efficient quota regimes would attain an optimal deterrence through minimal control and high fines, but in practice there are likely to be socially determined limits on how high fines could be set. We analyze these questions for the Northeast Arctic cod stock, using data on enforcement of Norwegian fish quotas.     

Climate Policy under Technology Spillovers

We study climate policy when there are technology spillovers between countries, as there is no instrument that (directly) corrects for these externalities. Without an international climate agreement, the (non-cooperative) equilibrium depends on whether countries use tradable quotas or carbon taxes as their environmental policy instruments. All countries are better-off in the tax case than in the quota case. Two types of international climate agreements are then studied: One is a Kyoto type of agreement where each country is assigned a specific number of internationally tradable quotas. In the second type of agreement, a common carbon tax is used domestically in all countries. None of the cases satisfy the conditions for the social optimum. Even if the quota price is equal to the Pigovian level, R&D investments will be lower than what is socially optimal in the quota case. It is also argued that the quota agreement gives higher R&D expenditures and more abatement than the tax agreement.     

Comparison between specific taxation and volume quotas in a free entry Cournot oligopoly

We revisit the classic discussion of the comparison between tax and quota, but in a free-entry Cournot oligopoly. We investigate a quantity ceiling regulation as a quota policy. We find that tariff-quota equivalence holds if the firms are symmetric and the number of firms is given exogenously. However the equivalence does not hold and taxes dominate quotas in the free entry market because quota can increases the number of entering firms and increases the loss caused by excessive entries.     

The merits of non-tradable quotas as a domestic policy instrument to prevent firm closure

Many countries fear that adopting a domestic tradable quota system for greenhouse gases that requires all emitters to pay for their quotas may lead to closures of emissions-intensive industrial companies. The starting point of this paper is that a government, to avoid firm closure, has opted to allocate quotas free of charge to emission-intensive industries. The aim of this paper is to explore to what extent making the free quotas tradable or non-tradable will affect investment in new abatement technology and firm closure. The conclusion is that the expectations about future product prices and the number of quotas distributed free of charge are crucial for the difference in the properties of tradable and non-tradable quotas.     

Quota Wars In Conjectural Variations*

This paper uses a two-country, two-good, conjectural-variations model of trade to show that a quota war will not end in autarky as Rodriguez (1974) and Tower (1975) concluded. Since both countries expect retaliatory responses to reductions in their quotas, both countries are willing to stop the trade war before autarky is reached. the possible equilibria are free trade, two equilibria in which one country has its optimal quota while the other country chooses free trade, and an interior solution. It is possible that some, all, or none of these equilibria will exist.     

Strategic trade policy under asymmetric information with screening

The design of strategic rent-extracting trade policies requires information that may be private, such as the cost structure of an industry or parameters of the demand function. As a consequence, under asymmetric information, the design of these policies is problematic. We propose screening menus consisting of different instruments (tariff vs. quota) designed to solve this informational issue. We first use a simple model that examines a Cournot duopoly between a domestic firm and a foreign firm with linear demand and cost functions, with both firms supplying a homogeneous good on the domestic market. In this scenario, if the government does not have information regarding the demand parameter, which is known by both firms, a menu consisting of a rent-extracting tariff for a low demand parameter and a rent-extracting quota for a high demand parameter maximizes the government's objective function. This menu leads the domestic firm to reveal private information. We then generalize this framework to a scenario with imperfect information regarding the firms' marginal cost. Finally, we discuss the issue of quotas generating public revenues and study the case of a menu consisting of a tariff and a free quota.     

State Trading and Tariff Rate Quotas: The Case of Korea's Rice Imports

This paper analyzes the effects of trade liberalization of tariff‐rate quotas under import “state trading enterprises” (STEs) in agriculture. An analytical framework is provided to determine the importance of which instrument is binding under competition (the in‐quota or out‐of‐quota tariff or the quota) and under the initial STE equilibrium. It also depends on whether or not the STE controls both the domestic market prices and owns/controls the import quota (and whether it is obligated to fill the quota or not). An empirical example of the rice STE in South Korea has simulations showing that an increase in imports can be achieved through a moderate expansion of the quota or a decrease in the out‐of‐quota tariff to the level where it becomes binding. However, a significant level of quota expansion induces the STE to switch to the autarky solution and social welfare declines.     

The Environmental Conundrum of Rare Earth Elements

Clean technologies, such as solar panels and wind turbines, help to curb global emissions, but they require dirty inputs for their production—i.e., mining rare earth elements (REEs) pollutes local environments. REEs are also the object of rent-shifting strategic trade policies, as highlighted by a recent WTO ruling against China’s quotas and tariffs on exports of REEs. We construct a three-country trade model with an environmental damage function, in order to examine the effects of three policies with different implications for the equilibrium quantities of dirty inputs and clean technologies: a downstream subsidy, an upstream export tariff, and an upstream pollution tax. We relate the welfare implications of the policies to the parameters of the damage function and to the number of downstream competitors. The effects of a unilateral policy switch from an export tariff to a domestic pollution tax, as suggested by China’s reaction to the WTO challenge, are also examined.     

Do employment quotas explain the occupational choices of disadvantaged minorities in India?

This article investigates the effects of a large-scale public sector employment quota policy for disadvantaged minorities (Scheduled Castes and Scheduled Tribes) in India on their occupational choices, as defined by skill level, during the 1980s and 1990s. We find that, first, the employment quota policy significantly affects the occupational structure of both disadvantaged minority populations. In response to the employment quotas, individuals belonging to the Scheduled Caste group are more likely to choose high-skill occupations and less likely to choose low- and middle-skill occupations, while individuals belonging to the Scheduled Tribe group are less likely to choose high-skill occupations and more likely to choose low- and middle-skill occupations. Second, the impact of the employment quotas is significantly related with an individual’s years of schooling. Overall, the results indicate that the employment quota policy changes the occupational choices of individuals within the targeted populations and contributes to their improved socio-economic standing.     

The allocation of PhD enrolment quotas in China’s research-oriented universities based on equity and efficiency principles

PhD enrolment quota allocation proves the key concern for China’s universities to promote institutional reform and improve research level, and it is often characterized by the zero sum game among schools within a university. Therefore, this article develops a new indicator system for PhD enrolment quota allocation and efficiency evaluation in China, and then it reallocates the quotas considering the preferences of decision-makers and the efficiency based on the historical data during 2011–2015 in a research-oriented university in China. The results indicate that, first, the preferences of decision-makers in the university for article publications and research funds may significantly affect the allocation of PhD enrolment quotas among schools. Second, when the linear combination weighting method is used, the overall efficiency for PhD enrolment allocation proves the highest, among various weighting methods concerned. Finally, to improve the overall efficiency of the 19 schools, five social science schools and four engineering schools have to cut their PhD enrolment quotas; among them, three engineering schools should reduce the largest redundant quotas sharply. The methods and results in this article are conducive to the allocation of education resources which have the zero sum feature and are often accompanied with undesirable outputs.     

Simultaneous Reform of Tariffs and Quotas

This paper presents a general result for simultaneous reform of tariffs and quotas in a small open economy, where some of the quota rents do not accrue to domestic residents. Absent highly perverse income effects, welfare must rise following a uniform proportionate reduction in tariffs and a uniform proportionate relaxation of quotas, weighted by their rent‐retention parameters. Previous results are shown to be special cases of this one, and its implications for practical policy advice and its relationship with the policy of “tariffication” of quotas are discussed.