Dumping and double crossing: The (in)effectiveness of cost-based trade policy under incomplete information

Dobrin R. Kolev, Thomas J. Prusa

Research output: Contribution to journalArticlepeer-review

16 Scopus citations

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 - Aug 2002

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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