Can a Periodic VER Raise Importing Country Welfare?

Can a Periodic VER Raise Importing Country Welfare?

Several authors have argued that if exporting firms anticipate a voluntary export restriction in a future period, and they expect VERs to be allocated in proportion to past exports, then they have an incentive to dump in the earlier period. In this paper we ask: How does a regime characterized by periodic VERs affect aggregate welfare, consumer welfare and import-competing producer welfare in the importing country? We discover paradoxically, that the answers are all uncertain. However, such a regime always shrinks worldwide efficiency, and normally, for the importer it shrinks aggregate welfare and consumer welfare and raises producer welfare. (JEL Classification: F13)