DP365 | Non-tariff Barriers and Rationing: UK Footwear Imports

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The imposition of a quantitative restriction on imports implies that someone somewhere is quantity-rationed. If prices rise to cut demand back to the constraint level, suppliers are rationed; if not, demanders are. In this paper we develop techniques for identifying if and when consumers are rationed and for taking account of rationing in the estimation of demand equations and in the calculation of welfare effects. By way of example we consider the effects of the various non-tariff barriers that have affected imports of different types of footwear from certain suppliers into the UK. We estimate simple CES demand systems for four types of footwear, identifying in each case the principal suppliers. Our results reveal several cases in which import restrictions on footwear led to rationing and suggest that even if prices did not rise to clear the market, the welfare losses to UK consumers of being limited in their purchases of footwear were as high as 53m pounds sterling in 1986.