Why Do Large Countries Prefer Quantitative Trade Restrictions?

In recent years, industrial countries have made increased use of quotas relative to tariffs for import protection. This development has troubled economists, who generally view quotas as more inefficient than tariffs. This paper compares tariffs and quotas used to protect a domestic monopoly in a large country. Examining policies that generate equivalent rents for the protected industry, the authors find that quotas are not necessarily more inefficient; quotas in general leave foreign producers better off; quota-holder rents exceed tariff revenues; and the global gains generated by a fall in foreign costs are greater under a quota. Copyright 1988 by WWZ and Helbing & Lichtenhahn Verlag AG