Dumping and double crossing

The (in)effectiveness of cost-based trade policy under incomplete information

Dobrin R. Kolev, Thomas Prusa

Research output: Contribution to journalArticle

15 Citations (Scopus)

Abstract

We argue that the rise of antidumping protection and the proliferation of voluntary export restraints (VERs) are fundamentally interrelated. We show that both can be explained by a cost-based definition of dumping when the domestic government has incomplete information about the foreign firm's costs. Given that its costs are only imperfectly observed and knowing the government's incentives to protect, efficient foreign firms will voluntarily restrain their exports prior to the antidumping investigation. In turn, the VER distorts the government's perception of the foreign firm's efficiency and leads to undesirably high duties regardless of the foreign firm's efficiency.

Original languageEnglish (US)
Pages (from-to)895-918
Number of pages24
JournalInternational Economic Review
Volume43
Issue number3
DOIs
StatePublished - Jan 1 2002

Fingerprint

Dumping
Foreign firms
Incomplete information
Trade policy
Costs
Government
Voluntary export restraints
Firm efficiency
Incentives
Proliferation

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

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Dumping and double crossing : The (in)effectiveness of cost-based trade policy under incomplete information. / Kolev, Dobrin R.; Prusa, Thomas.

In: International Economic Review, Vol. 43, No. 3, 01.01.2002, p. 895-918.

Research output: Contribution to journalArticle

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