NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Geoffrey Barrows

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Working Papers

October 2006Testing the Theory of Trade Policy: Evidence from the Abrupt End of the Multifibre Arrangement
with James Harrigan: w12579
Quota restrictions on United States imports of apparel and textiles under the multifibre arrangement (MFA) ended abruptly in January 2005. This change in policy was large, predetermined, and fully anticipated, making it an ideal natural experiment for testing the theory of trade policy. We focus on simple and robust theory predictions about the effects of binding quotas, and also compute nonparametric estimates of the cost of the MFA. We find that prices of quota constrained categories from China fell by 38% in 2005, while prices in unconstrained categories from China and from other countries changed little. We also find substantial quality downgrading in imports from China in previously constrained categories, as predicted by theory. The annual cost of the MFA to U.S. consumers was about ...

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