Abstract
This paper uses a partial equilibrium analysis to show that a partial trade liberalization may reduce a country's welfare due to a loss in monopolistic rent if it is carried out by a quota. The quota can be set by either the foreign or domestic government (it is considered as a voluntary export restraint if it is set by the foreign government). The quota rents in the case of a voluntary export restraint are captured by the foreign agent. Therefore, the reduction in the domestic country's welfare is more likely in this case rather than in the case of the quota set by the domestic government. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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