Internal Quota‐Allocation Schemes and the Costs of the Mfa*

This paper suggests that schemes used within developing countries to allocate textile export quota among domestic producers typically have more severe negative effects on developing-country economic performance than the MFA export quotas themselves. We summarize allocation schemes in 16 countries, highlighting common “lock-in” and “rent-dissipation” effects of such schemes. We then use a global general-equilibrium model to evaluate the effects of MFA removal with and without these additional effects. Results indicate that estimates of gains to developing countries from an MFA removal increase sharply when internal quota-allocation schemes are taken into account.