ABSTRACT
This chapter shows that the period of the Voluntary Restraint Agreements (VARs) was associated with substantial increases in the average prices of all cars. It separates the effects of the VRAs from those of other policies, most importantly the Government's fuel economy regulations. The chapter also shows that disaggregated analysis is essential for accurate forecasting of auto industry output, because the nature of competition and the patterns of demand differ widely across car size classes. It presents the results of the simulations for the US auto market, including the effects of the VRAs on factor prices and analysis the Price and Output effects which were associated with the VRAs. The chapter summarizes the output effects of the VRAs in terms of the overall number of cars produced in the US, under various assumptions about the effects of the other factors, and then estimates the employment impacts of the VRAs.
