| Abstract: | Voluntary Import Expansion is a policy under which one country (Japan) agrees to import a minimum quantity of a commodity from another country (U.S.) It turns out that Japan is better off under an equivalent export subsidy; the U.S. is better off under a VIE; and the welfare of a third-country is higher under a policy which improves its term of trade. The "optimum" VIE for the U.S. results in a trade equilibrium point where the U.S. fnter curve is of unitary elasticity. We also consider the case of a U.S. export which is Giffen good in Japan. |
