RENT SHARING IN THE MULTIFIBER ARRANGEMENT - THE CASE OF MEXICO

Rent Sharing in the Multi-Fibre Arrangement: The Case of Mexico. - This paper investigates the existence of market power and the distribution of rents in the market for Mexico's exports of apparel to the United States under the Multi-Fibre Arrangement (MFA). In the case of Mexico, rents from MFA restrictions are probably very small. The adjusted price of Mexican exports is consistently below the price for U.S. production, indicating that rent sharing may be taking place. Alternative explanations for the price difference are tested. The final result indicates that rent sharing may exist in woven shirts and underwear. In particular, U.S. importers may receive up to 49 percent of available rents.