When exporting firms face the prospect of voluntary export restraints (VER's), they have an incentive to export more than with no prospect of a VER, since greater exports lead to larger license allocations in the event of a VER. Export-country governments' incentives differ, leading either to export tax or subsidy, depending on the circumstances. The prospect of one departure from free trade thus leads to another, a domino effect. Anti-dumping enforcement will ordinarily not eliminate and ironically may increase dumping, toppling another domino.

Daniel Wisecarver and Richard Schmalensee in two recent papers on the social cost of input market distortions have committed a rather interesting error. They find a different measure of welfare loss due to an input price distortion depending upon whether the measure is in the output or input market. This is incorrect, as intuition surelv argues. and the source of the error lies in improper use of the Taylor's series expansion. Correcting the error suggests a worthwhile generalization.

The nonequivalence of tariffs and quotas under a wide variety of circumstances is well established in economic theory. This study considers heterogeneity as a source of nonequivalence and demonstrates its practical importance. Where restriction is inevitable, the bias of economists in favor of price instruments is not thoroughly grounded; this study should help provide a foundation. The point of departure from the equivalence model is differentiation of products.

When exporting firms face the prospect of voluntary export restraints, they have an incentive to export more than with no prospect of a voluntary export restraint, since greater exports lead to larger license allocations in the event of a voluntary export restraint. Export-country governments' incentives differ, leading either to export tax or subsidy, depending on the circumstances. The prospect of one departure from free trade, thus, leads to another, a domino effect. Antidumping enforcement will ordinarily not eliminate and ironically may increase dumping.