The welfare effects of an anti-dumping duty on the New Zealand footwear industry

Abstract

The deregulation of the footwear Industry during the 1980's has led to increasing pressures by manufacturers for protection against "unfair imports". In June 1992 an anti-dumping duty was imposed on "certain women's non leather footwear from China". By estimating the responsiveness of five different income groups to a change in the price of footwear, it was possible to determine the distributional effect of the duty among consumers.

The empirical analysis undertaken in this thesis infers that the demand of all five income groups is inelastic with respect to changes in the price of footwear. However low income groups are more responsive to price changes than high income groups. These elasticities applied to the market for "certain women's footwear from China", illustrates that in the likely scenario that low income groups consume more of the cheap footwear, it was these groups that faced a greater loss in consumer surplus.

The effect is a redistribution of income from low income groups to the footwear manufacturers, and a reduction in overall welfare. Further, from society’s perspective it was shown that imposing an anti-dumping duty on footwear, which is predominately bought by low income groups, would result in a greater loss to society as a whole.