TY  - JOUR
AU  - Harrigan,James
AU  - Barrows,Geoffrey
TI  - Testing the Theory of Trade Policy: Evidence from the Abrupt End of the  Multifibre Arrangement
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12579
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12579
L1  - http://www.nber.org/papers/w12579.pdf
N1  - Author contact info:
James Harrigan
Department of Economics
University of Virginia
P.O. Box 400182
Charlottesville, VA 22904-4182
Tel: 434-243-8354
Fax: 434-982-2904
E-Mail: harrigan@nber.org

Geoffrey Barrows
International Research Department
33 Liberty Street
New York, NY 10045
E-Mail: geoffrey.barrows@gmail.com
AB  - 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 $90 per household.
ER  -