Keywords
import quotas
automobiles
G-3
Colombia
How to Cite
Abstract
This paper assesses the effects of the “Grupo de los Tres” (G-3) trade agreement in the Colombian automobile market. Assuming that demand might be described by a Discrete-Choice model, this paper develops a partial-equilibrium model in order to analyze the import quota of automobiles produced by the Mexican assemblers and its effects upon prices on the Colombian Automobile Sector. The results of this paper evidence that the quota reduced average market prices in no more than 3%, comparing the case without G-3. Likewise, the price in Mexican cars were reduced on 20%, but prices of domestic and other import cars were unaffected. Finally, There is evidence that the distribution of the price reduction among classes is independent of market-shares. Therefore, the import quota does not accomplish the goals of domestic policy-makers. These results are relevant in order to make trade policies in targeted industries and are useful for firms of the Automobile market when they undertake strategic decisions.
JEL Classification: F13, F14, L62, D12, D20.
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