The author wishes to thank Jonathan Eaton, Maxim Engers, Charles Engel, Ronald Fischer, and Jay Levin for comments and assistance, and espcially Kevin Cotter for suggesting one of the proofs. The comments of two anonymous referees are also greatly appreciated.
THE POLITICAL ECONOMY OF QUOTA RENTS IN A DYNAMIC INTERNATIONAL TRADE MODEL*
Version of Record online: 27 OCT 2006
Economics & Politics
Volume 7, Issue 3, pages 243–261, November 1995
How to Cite
Mitchell, S. K. (1995), THE POLITICAL ECONOMY OF QUOTA RENTS IN A DYNAMIC INTERNATIONAL TRADE MODEL. Economics & Politics, 7: 243–261. doi: 10.1111/j.1468-0343.1995.tb00113.x
- Issue online: 27 OCT 2006
- Version of Record online: 27 OCT 2006
This paper considers the implications of allowing quota rents to become capitalized. Capitalized quota rents crowd out physical capital in savers’portfolios, reducing the capital stock. Capitalization of quota rents also makes removal of the quota politically more difficult, since those currently alive may not be able to fully compensate the losers before the losers die. I use an overlapping generations model to provide examples which illustrate the difficulty of removing a quota once its rents have been fully capitalized. This work has implications for any policy which could lead to capitalized rents.