TY  - JOUR
AU  - Kolev,Dobrin R.
AU  - Prusa,Thomas J.
TI  - Dumping and Double Crossing:  The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6986
PY  - 1999
Y2  - February 1999
UR  - http://www.nber.org/papers/w6986
L1  - http://www.nber.org/papers/w6986.pdf
N1  - Author contact info:
Thomas J. Prusa
Department of Economics
New Jersey Hall
Rutgers University
New Brunswick, NJ 08901-1248
Tel: 908.443.1565
E-Mail: prusa@econ.rutgers.edu
AB  - We argue that the rise of antidumping protection and the proliferation of voluntary export restraints are fundamentally inter-related.  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 desire to offer greater protection against competitively priced imports, 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 often leads to undesirably high duties regardless of the foreign firm's efficiency.  The clumsy way that duties are levied benefits domestic firms, which explains the popularity of cost-based complaints.
ER  -