Working Paper: NBER ID: w5695
Authors: Barbara J. Spencer
Abstract: Despite valid criticisms, many developing countries have issued non-transferable import licenses to a limited number of final-good producers so as to restrict imports of an input capital equipment. This paper demonstrates that for a given import quota, such licensing restrictions can actually increase domestic production of both the input and the final product, but at the cost of reduced quota rents. Under pure competition, domestic welfare falls relative to the use of marketable quota licenses, but if foreigners would get the quota rents, or if external economies cause decreasing costs, then bureaucratic allocation can dominate.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Non-transferable import licenses (D45) | Increased domestic production of intermediate goods (L60) |
| Non-transferable import licenses (D45) | Increased domestic production of final goods (E20) |
| Bureaucratic allocation (D73) | Decreased marginal costs faced by license holders (D45) |
| Decreased marginal costs faced by license holders (D45) | Increased domestic production of intermediate goods (L60) |
| Decreased marginal costs faced by license holders (D45) | Increased domestic production of final goods (E20) |