%0 Generic
%D Working Paper
%T The Laffer Curve for Rules of Origin
%A Keith Head
%A Thierry Mayer
%A Marc J. Melitz
%X We analyze how heterogeneous firms in a regional trade area (RTA) respond to
rules of origin (RoO). Firms can source a continuum of inputs from both within and
outside the RTA, and choose whether to comply with the RoO or pay a tariff penalty.
We show how a Laffer curve for RoOs arises naturally in this setting: stricter content
requirements initially expand regional part sourcing, but contract it when set at levels
above a threshold. The parameters of the model are fit to data on regional part cost
shares for all autos sold in North America. The calibrated model quantifies the impact
of stricter RoOs imposed by the 2020 revision to NAFTA (USMCA). The stricter
content requirement (62.5% to 75%) would raise employment by only 1.2%, while increasing
auto prices assembled in the region by 0.3%. The higher requirement initially
proposed by U.S. negotiators (85%) would lead to both higher prices and lower employment.
%G eng
%0 Generic
%D Working Paper
%T Aggregate-Demand Amplification of Supply Disruptions:The Entry-Exit Multiplier
%A Florin O. Bilbiie
%A Marc J. Melitz
%X Due to its impact on nominal firm profits, price rigidity amplifies the response of entry and
exit to adverse supply shocks, such as COVID-19. This “entry-exit multiplier” triggers substantial
magnification of the welfare losses due to negative supply shocks—especially when
wages are also rigid. This is in stark contrast to the benchmark New Keynesian model (NK),
which predicts a positive output gap in response to that same shock under the same monetary
policy. Endogenous entry-exit thus radically changes the consequences of nominal rigidities.
In addition to the aggregate-demand amplification of supply disruptions, our model also reconciles
the response of hours worked across the NK and RBC models. And unlike the standard
NK model, our model can also be used to evaluate how monetary expansions can alleviate or
even eliminate the negative output gap induced by supply disruptions.
JEL Codes: E3, E4, E5, E6
Keywords: Entry-Exit; Aggregate Demand and Supply; Variety; Sticky Prices; StickyWages;
COVID-19; Recessions.
%G eng
%0 Journal Article
%J American Economic Journal: Economic Policy
%D Forthcoming
%T Opposing firm-level responses to the China shock: Output competition versus input supply
%A Phillipe Aghion
%A Bergeaud, Antonin
%A Matthieu Lequien
%A Marc J. Melitz
%A Thomas Zuber
%X We decompose the “China shock” into two components that induce different
adjustments for firms exposed to Chinese exports: an output shock affecting firms
selling goods that compete with similar imported Chinese goods, and an input
supply shock affecting firms using inputs similar to the imported Chinese goods.
Combining French accounting, customs, and patent information at the firm-level,
we show that the output shock is detrimental to firms’ sales, employment and
innovation. Moreover, this negative impact is concentrated on low-productivity
firms. By contrast, we find a positive effect - although often not significant - of the
input supply shock on firms’ sales, employment and innovation.
JEL classification: F14, O19, O31, O33, O34
Keywords: Competition shock, patent, firms, import
%B American Economic Journal: Economic Policy
%G eng
%0 Journal Article
%J Journal of the European Economic Association
%D 2023
%T European Firm Concentration and Aggregate Productivity
%A Tommaso Bighelli
%A Filippo di Mauro
%A Marc J. Melitz
%A Matthias Mertens
%B Journal of the European Economic Association
%V 21
%P 455-483
%G eng
%N 2
%0 Book Section
%B The Economics of Creative Destruction
%D 2023
%T Trade and Innovation
%A Marc J. Melitz
%A Stephen J. Redding
%X Two central insights from the Schumpeterian approach to innovation and growth are that
the pace of innovation is endogenously determined by the expectation of future prots and
that growth is inherently a process of creative destruction. As international trade is a key
determinant of rm protability and survival, it is natural to expect it to play a key role in
shaping both incentives to innovate and the rate of creative destruction. In this paper, we review
the theoretical and empirical literature on trade and innovation. We highlight four key
mechanisms through which international trade aects endogenous innovation and growth:
(i) market size; (ii) competition; (iii) comparative advantage; (iv) knowledge spillovers. Each
of these mechanisms oers a potential source of dynamic welfare gains in addition to the
static welfare gains from trade from conventional trade theory. Recent research has suggested
that these dynamic welfare gains from trade can be substantial relative to their static
counterparts. Discriminating between alternative mechanisms for these dynamic welfare
gains and strengthening the evidence on their quantitative magnitude remain exciting areas
of ongoing research.
Keywords: innovation, growth, international trade
JEL Classication: F1, F43, O3, O4
%B The Economics of Creative Destruction
%I Harvard University Press
%G eng
%0 Book Section
%B Handbook of International Economics
%D 2022
%T International Trade and Innovation
%A Ufuk Akcigit
%A Marc J. Melitz
%X We provide a review of the recent literature – both theoretical and empirical – analyzing
the multi-dimensional connections between globalization and innovation. We
develop a model that features many of those mechanisms that connect trade and innovation.
It features the joint selection of firms into innovation and international market
participation (in our model, we restrict that participation to exports). Our model also
highlights how exposure to international markets affects the incentives for innovation.
%B Handbook of International Economics
%I Elsevier
%V 5
%P 377-404
%G eng
%0 Journal Article
%J The Review of Economics and Statistics
%D 2022
%T The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports
%A Philippe Aghion
%A Bergeaud, Antonin
%A Matthieu Lequien
%A Marc J. Melitz
%X
This paper investigates the effect of export shocks on innovation. On the one hand a positive shock increases market size and therefore innovation incentives for all firms. On the other hand it increases competition as more firms enter the export market. This in turn reduces profits and therefore innovation incentives particularly for firms with low productivity. Overall the positive impact of the export shock on innovation is magnified for high productivity firms, whereas it may negatively affect innovation in low productivity firms. We test this prediction with patent, customs and production data covering all French manufacturing firms. To address potential endogeneity issues, we construct firm-level export proxies which respond to aggregate conditions in a firm's export destinations but are exogenous to firm-level decisions. We show that patenting robustly increases more with export demand for initially more productive firms. This effect is reversed for the least productive firms as the negative competition effect dominates.
%B The Review of Economics and Statistics %G eng %0 Journal Article %J The Review of Economics and Statistics %D 2021 %T Product Mix and Firm Productivity Responses to Trade Competition %A Thierry Mayer %A Marc J. Melitz %A Gianmarco I.P. Ottaviano %XWe document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. In response to positive demand shocks, those French firms skew their export sales towards their best performing products; and also extend the range of products sold to that market. We develop a theoretical model of multi-product firms and derive the specific demand conditions needed to generate these product-mix reallocations. These demand conditions are associated with endogenous price elasticities that satisfy Marshall’s Second Law of Demand (the price elasticity of demand decreases with consumption). Under these demand conditions, our theoretical model highlights how the increased competition from demand shocks in export markets – and the induced product mix reallocations – induce productivity changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity are substantial – and explain an important share of aggregate productivity fluctuations for French manufacturing
%B The Review of Economics and Statistics %V 103 %P 874-891 %8 2016 %G eng %N 5 %0 Journal Article %J American Economic Journal: Macroeconomics %D 2019 %T Monopoly Power and Endogenous Product Variety: Distortions and Remedies %A Florin O. Bilbiie %A Ghironi, Fabio %A Marc J. Melitz %B American Economic Journal: Macroeconomics %V 11 %P 140-74 %G eng %N 4 %0 Book Section %B World Trade Evolution: Growth, Productivity and Employment %D 2018 %T Trade Competition and Reallocations in a Small Open Economy %A Marc J. Melitz %E Lili Yan Ing %E Miaojie Yu %B World Trade Evolution: Growth, Productivity and Employment %I Routledge %G eng %0 Journal Article %J Review of World Economics %D 2017 %T Competitive effects of trade: theory and measurement %A Marc J. Melitz %B Review of World Economics %G eng %U https://link.springer.com/article/10.1007%2Fs10290-017-0303-3 %0 Web Page %D 2017 %T The Jones Act and the Cost of Shipping Between U.S. Ports %A Dan Bergstresser %A Marc Melitz %B EconoFact %G eng %U http://econofact.org/the-jones-act-and-the-cost-of-shipping-between-u-s-ports %0 Web Page %D 2017 %T What Do We Learn from Bilateral Trade Deficits? %A Michael Klein %A Marc Melitz %B The Econofact Network %G eng %U http://econofact.org/what-do-we-learn-from-bilateral-trade-deficits %0 Web Page %D 2017 %T Driving Home the Importance of NAFTA %A Marc Melitz %B The Econofact Network %G eng %U http://econofact.org/driving-home-the-importance-of-nafta %0 Journal Article %J RAND Journal of Economics %D 2015 %T Dynamic Olley-Pakes Productivity Decomposition with Entry and Exit %A Marc Melitz %A Saso Polanec %XIn this paper, we propose an extension of the productivity decomposition method developed by Olley & Pakes (1996). This extension provides an accounting for the contributions of both firm entry and exit to aggregate productivity changes. It breaks down the contribution of surviving firms into a component accounting for changes in the firm-level distribution of productivity and another accounting for market share reallocations among those firms following the same methodology as the one proposed by Olley & Pakes (1996). We argue that the other decompositions that break-down aggregate productivity changes into these same four components introduce some biases in the measurement of the contributions of entry and exit. We apply our proposed decomposition to the large measured increases of productivity in Slovenian manufacturing during the 1995-2000 period and contrast our results with those of other decompositions. We find that, over a 5-year period, the measurement bias associated with entry and exit is substantial, accounting for up to 10 percentage points of aggregate productivity growth. We also find that market share reallocations among surviving firms played a much more important role in driving aggregate productivity changes.
Keywords: Productivity Decomposition, Industry Productivity
JEL Classication Numbers: C10, O47
We show that endogenous firm selection provides a new welfare margin for heterogeneous firm models of trade (relative to homogeneous firm models). Under some parameter restrictions, the trade elasticity is constant and is a sufficient statistic for welfare, along with the domestic trade share. However, even small deviations from these restrictions imply that trade elasticities are variable and differ across markets and levels of trade costs. In this more general setting, the domestic trade share and endogenous trade elasticity are no longer sufficient statistics for welfare. Additional empirically observable moments of the micro structure also matter for welfare.
KEYWORDS: firm heterogeneity, welfare gains from trade, trade policy evaluation
J.E.L. CLASSIFICATION: F12, F15
Missing Gains from Trade?
%A Marc J. Melitz %A Stephen J Redding %XThe theoretical result that there are welfare gains from trade is a central tenet of international economics. In a class of trade models that satisfy a gravity equation,the welfare gains from trade can be computed using only the open economy domestic trade share and the elasticity of trade with respect to variable trade costs. The measured welfare gains from trade from this quantitative approach are typically relatively modest. In this paper, we suggest a channel for welfare gains that this quantitative approach typically abstracts from: trade-induced changes in domestic productivity. Using a model of sequential production, in which trade induces a reorganization of production that raises domestic productivity, we show that the welfare gains from trade can become arbitrarily large. JEL CLASSIFICATION: F10, F11, F15 KEYWORDS: Productivity, Sequential production, Welfare gains from trade
%B American Economic Review %V 104 %P 317-21 %G eng %U http://dx.doi.org/10.1257/aer.104.5.317 %N 5 %0 Journal Article %J American Economic Review %D 2014 %T Market Size, Competition, and the Product Mix of Exporters %A Marc Melitz %A Thierry Mayer %A Gianmarco I.P. Ottaviano %XWe build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
%B American Economic Review %V 104 %P 495-536 %G eng %N 2 %0 Book Section %B Handbook of International Economics, 4th ed %D 2014 %THeterogeneous Firms and Trade
%A Marc J. Melitz %A Stephen J Redding %XThis paper reviews the new approach to international trade based on firm heterogeneity in differentiated product markets. This approach explains a variety of features exhibited in disaggregated trade data, including the higher productivity of exporters relative to non-exporters, within-industry reallocations of resources following trade liberalization, and patterns of trade participation across firms and destination markets. Accounting for these empirical patterns reveals new mechanisms through which the aggregate economy is affected by trade liberalization, including endogenous increases in average industry and firm productivity.
%B Handbook of International Economics, 4th ed %I Elsevier %V 4 %P 1-54 %G eng %U http://dx.doi.org/10.1016/B978-0-444-54314-1.00001-X %0 Book Section %B Advances in Economics and Econometrics Tenth World Congress. Applied Economics %D 2013 %T Trade Liberalization and Firm Dynamics %A Ariel Burstein %A Marc Melitz %X In this paper, we analyze the transition dynamics associated with an economy's response to trade liberalization. We start by reviewing the recent literature that incorporates firm dynamics into models of international trade. We then build upon that literature to characterize the role of firm dynamics, export-market selection, firm-level innovation, sunk export costs, and firms' expectations regarding the time path of liberalization in generating those transition dynamics following trade liberalization. These modeling ingredients generate substantial aggregate transition dynamics as they shift and shape the endogenous distribution of firms over time. Our results show how the responses of trade volumes, innovation, and aggregate output can vary greatly over time depending on those modeling ingredients. This has important consequences for many issues in international economics that rely on predictions for the effects of globalization over time on those key aggregate outcomes. %B Advances in Economics and Econometrics Tenth World Congress. Applied Economics %7 Econometric Society Monographs %I Cambridge University Press %C Cambridge, UK %V 2 %G eng %0 Journal Article %J Journal of Economic Perspectives %D 2012 %T Gains from Trade when Firms Matter %A Daniel Trefler %A Marc Melitz %XThe rising prominence of intra-industry trade and huge multinationals has transformed the way economists think about the gains from trade. In the past, we focused on gains that stemmed either from endowment differences (wheat for iron ore) or inter-industry comparative advantage (David Ricardo's classic example of cloth for port). Today, we focus on three sources of gains from trade: 1) love-of-variety gains associated with intra-industry trade; 2) allocative efficiency gains associated with shifting labor and capital out of small, less-productive firms and into large, more-productive firms; and 3) productive efficiency gains associated with trade-induced innovation. This paper reviews these three sources of gains from trade both theoretically and empirically. Our empirical evidence will be centered on the experience of Canada following its closer economic integration in 1989 with the United States—the largest example of bilateral intra-industry trade in the world—but we will also describe evidence for other countries.
%B Journal of Economic Perspectives %V 26 %G eng %N 2 %0 Journal Article %J Journal of the European Economic Association %D 2012 %T Volatility, Labor Market Flexibility, and the Pattern of Comparative Advantage %A Alejandro Cuñat %A Marc Melitz %B Journal of the European Economic Association %V 10 %P 225-254 %G eng %U http://onlinelibrary.wiley.com/doi/10.1111/j.1542-4774.2011.01038.x/abstract %0 Journal Article %J Journal of Political Economy %D 2012 %T Endogenous Entry, Product Variety, and Business Cycles %A Florin O. Bilbiie %A Ghironi, Fabio %A Marc Melitz %B Journal of Political Economy %V 120 %P 304-345 %G eng %N 2 %0 Journal Article %J Journal of the European Economic Association P&P %D 2010 %T A Many-Country, Many-Good Model of Labor Market Rigidities as a Source of Comparative Advantage %A Alejandro Cuñat %A Marc Melitz %X We extend the theoretical framework in Cuñat and Melitz (2007) to a many-country setup where
countries exhibit different degrees of labor market flexibility. We rely on the insights from a
recent paper by Costinot (2009) to obtain precise predictions about comparative advantage in
this setting: countries with more flexible labor markets specialize in more volatile industries.
Empirical studies of production units within sectors have reported a massive amount of
heterogeneity in various performance measures (most notably, size and productivity). This
heterogeneity, within sectors, matters for theoretical and empirical models of trade. Trade,
or trade liberalization more generally, induces important reallocations between heterogeneous
producers in a sector: the smallest or least productive producers are forced to exit, and market
shares are further reallocated between less productive producers (who do not export) towards
larger, more productive exporters. These reallocations generate a new channel for productivity
and welfare gains from trade.
We develop a simple model of international trade with heterogeneous firms that is consistent with a number of stylized features of the data. In particular, the model predicts positive as well as zero trade flows across pairs of countries, and it allows the number of exporting firms to vary across destination countries. As a result, the impact of trade frictions on trade flows can be decomposed into the intensive and extensive margins, where the former refers to the trade volume per exporter and the latter refers to the number of exporters. This model yields a generalized gravity equation that accounts for the self-selection of firms into export markets and their impact on trade volumes. We then develop a two-stage estimation procedure that uses an equation for selection into trade partners in the first stage and a trade flow equation in the second. We implement this procedure parametrically, semiparametrically, and nonparametrically, showing that in all three cases the estimated effects of trade frictions are similar. Importantly, our method provides estimates of the intensive and extensive margins of trade. We show that traditional estimates are biased and that most of the bias is due not to selection but rather due to the omission of the extensive margin. Moreover, the effect of the number of exporting firms varies across country pairs according to their characteristics. This variation is large and particularly so for trade between developed and less developed countries and between pairs of less developed countries.
%B Quarterly Journal of Economics %V 123 %P 441-487 %G eng %0 Journal Article %J Review of Economic Studies %D 2008 %T Market Size, Trade, and Productivity %A Marc Melitz %A Gianmarco Ottaviano %XWe develop a monopolistically competitive model of trade with firm heterogeneity—in terms of productivity differences—and endogenous differences in the “toughness” of competition across markets—in terms of the number and average productivity of competing firms. We analyse how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average mark-ups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower mark-ups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modelling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous mark-ups.
%B Review of Economic Studies %V 75 %P 295-316 %G eng %0 Journal Article %J American Economic Review P&P %D 2007 %T Trade Flow Dynamics with Heterogeneous Firms %A Ghironi, Fabio %A Marc Melitz %X We use a two-country, stochastic, general equilibrium model of international trade and macro-
economic dynamics with monopolistic competition and heterogeneous
rms to explore the role of
entry in the domestic economy and the extensive margin of international trade in the dynamics
of U.S. trade ows over the business cycle. We show that the model can reproduce the evidence
on the cyclicality of U.S. trade and important features of the evidence on the extensive margins
of domestic entry and international trade. Entry in the domestic economy and the implied
di¤erences in the timing of export and import expansions in response to favorable productivity
shocks provide the key mechanism for the models ability to explain this range of stylized facts.
This paper studies the role of endogenous producer entry and product creation for monetary policy
analysis and business cycle dynamics in a general equilibrium model with imperfect price adjustment.
Optimal monetary policy stabilizes product prices, but lets the consumer price index vary to accommodate
changes in the number of available products. The free entry condition links the price of equity (the
value of products) with marginal cost and markups, and hence with inflation dynamics. No-arbitrage
between bonds and equity links the expected return on shares, and thus the financing of product creation,
with the return on bonds, affected by monetary policy via interest rate setting. This new channel of
monetary policy transmission through asset prices restores the Taylor Principle in the presence of capital
accumulation (in the form of new production lines) and forward-looking interest rate setting, unlike
in models with traditional physical capital. We also study the implications of endogenous variety for
the New Keynesian Phillips curve and business cycle dynamics more generally, and we document
the effects of technology, deregulation, and monetary policy shocks, as well as the second moment
properties of our model, by means of numerical examples.
We build a dynamic model of
rm-level adjustment to trade liberalization that jointly in-
corporates the main salient features highlighted by recent empirical micro-level studies of
rms
and trade. Our model captures the joint entry, exit, export, and innovation decisions (subject
to sunk costs) of heterogeneous
rms as they adjust to trade liberalization. We characterize
this industrial evolution over its entire transition path to a new steady state with lower trade
costs - starting from the time that trade liberalization is
rst announced (but not necessarily yet
implemented). We rely on numerical methods to solve for these equilibrium paths. In order to
more accurately capture the dynamics of
rm adjustments to trade, we model the sunk nature
of market entry costs for both the domestic and export market - as well as the per-unit and
additional
xed costs of exporting incurred in every period. Firm-level productivity evolves
stochastically, and innovation involves a trade-o¤ between its cost and a return in terms of a
betterdistribution of future productivity draws.
Although the empirical micro-level studies of
rms and export status initially emphasized
the selection e¤ects of more productive
rms into export markets, several recent studies have
highlighted a separate channel for the e¤ects of trade on productivity operating through
rm-
level improvements in productivity. Our model captures both of these channels for the pro-
ductivity enhancing e¤ects of trade - and analyzes their interactions over the adjustment path
to lower trade costs. In particular, we highlight how the relative timing and magnitude of
rm-level productivity improvements and export market entry decisions are also determined
by non-technological factors such as the timing of trade liberalization announcements and the
speed of liberalization. Under all these di¤erent trade liberalization scenarios (anticipated ver-
sus surprise, gradual versus sudden), we characterize both the distributional e¤ects across
rms
as well as their aggregate e¤ects for industrial performance. We
nd that the anticipation of
upcoming liberalization, and a more gradual path of liberalization (once implemented) induces
rms to innovate ahead of export market entry.
We study the e¢ ciency properties of a dynamic, stochastic, general equilibrium, macroeco-
nomic model with monopolistic competition and
rm entry subject to sunk costs, a time-to-build
lag, and exogenous risk of
rm destruction. Under inelastic labor supply and linearity of produc-
tion in labor, the market economy is e¢ cient if and only if symmetric, homothetic preferences
are of the C.E.S. form studied by Dixit and Stiglitz (1977). Otherwise, e¢ ciency is restored by
properly designed sales, entry, or asset trade subsidies (or taxes) that induce markup synchro-
nization across time and states, and align the consumer surplus and pro
t destruction e¤ects
of
rm entry. When labor supply is elastic, heterogeneity in markups across consumption and
leisure introduces an additional distortion. E¢ ciency is then restored by subsidizing labor at
a rate equal to the markup in the market for goods. Our results highlight the importance of
preserving the optimal amount of monopoly pro
ts in economies in which
rm entry is costly.
Inducing marginal cost pricing restores e¢ ciency only when the required sales subsidies are
nanced with the optimal split of lump-sum taxation between households and
rms.
We develop a stochastic, general equilibrium, two-country model of trade and
macroeconomic dynamics. Productivity differs across individual, monopolistically
competitive firms in each country. Firms face a sunk entry cost in the domestic
market and both fixed and per-unit export costs. Only relatively more productive
firms export. Exogenous shocks to aggregate productivity and entry or trade costs
induce firms to enter and exit both their domestic and export markets, thus
altering the composition of consumption baskets across countries over time. In a
world of flexible prices, our model generates endogenously persistent deviations
from PPP that would not exist absent our microeconomic structure with heterogeneous
firms. It provides an endogenous, microfounded explanation for a Harrod-
Balassa-Samuelson effect in response to aggregate productivity differentials and
deregulation. Finally, the model successfully matches several moments of U. S.
and international business cycles.
This paper develops and analyzes a welfare maximizing model of infant industry protection. The
domestic infant industry is competitive and experiences dynamic learning effects that are external to
firms. The competitive foreign industry is mature and produces a good that is an imperfect substitute
for the domestic good. A government planner can protect the infant industry using domestic
production subsidies, tariffs, or quotas in order to maximize domestic welfare over time. As
protection is not always optimal (although the domestic industry experiences a learning externality),
the paper shows how the decision to protect the industry should depend on the industry’s learning
potential, the shape of the learning curve, and the degree of substitutability between domestic and
foreign goods.
Assuming some reasonable restrictions on the flexibility over time of the policy instruments, the
paper subsequently compares the effectiveness of the different instruments. Given such restrictions,
the paper shows that quotas induce higher welfare levels than tariffs. In some cases, the dominance
of the quota is so pronounced that it compensates for any amount of government revenue loss related
to the administration of the quota (including the case of a voluntary export restraint, where no
revenue is collected). In similar cases, the quota may even be preferred to a domestic production
subsidy.