International Capital Mobility and the Costs of U.S. Import Restraints.

Abstract

This paper evaluates general equilibrium welfare effects of tariffs, quotas, and voluntary export restraints under different assumptions about international capital mobility. We show analytically that, when induced terms-of-trade and rental-rate effects are considered, the qualitative influence of capital mobility on the costs of protection cannot be ascertained unambiguously. simulation estimates for the U.S. indicate the practical importance of capital mobility, as well as of terms-of-trade and rental-rate adjustments, in determining the ultimate welfare effects on import restraints. Copyright 1993 by Blackwell Publishing Ltd.