Export-share requirements and welfare in less developed countries: a three-sector general equilibrium analysis

This paper analyzes the welfare impacts of export-share requirements in a three sector, general equilibrium, sector-specific unemployment model. We demonstrate that the favorable welfare impact of export-share requirements is mitigated by a rise in the unemployment ratio. In addition, we deduce the welfare impact of a change in tariff rate for a given level of export share. Our analysis suggests that the export-share requirement policy is always welfare improving in the long run. The policy may not improve welfare in the short or intermediate run, however; the condition under which export-share requirements are welfare enhancing is derived and interpreted.