Approximating the Effective Protection Coefficient without Reference to Technological Data |
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| Authors: | Conway, Patrick J. Bale, Malcolm |
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| Affiliation: | Patrick J. Conway is an assistant professor of economics at the University of North Carolina at Chapel Hill and Malcolm Bale is an economist in the Latin America and the Caribbean Country Department 1 of the World Bank. Research for this study was undertaken while Bale was a staff member of and Conway a consultant to the Country Policy Department of the World Bank. The authors thank Dennis Appleyard, Alfred Field, Kenneth Harling, and Andrea Maneschi for perceptive comments, and Thérèse Bélot for statistical assistance. |
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| Abstract: | When proposals for reform of tariff or subsidy policies aremade, attempts to predict the effect on incentives are frequentlyhampered by the need for input-output technical data. This articledevelops and illustrates the use of a methodology for approximatingeffective protection coefficients (EPCs) when such data areunavailable or outdated. It derives the equations which approximatethe EPC from statistical analysis of a cross section of existingEPC studies for four agricultural commodities: corn, cotton,rice, and wheat. Informational requirements for computing approximationsinclude the nominal protection coefficients on output and tradableinputs and readily available macroeconomic data. These approximationequations perform well in an out-of-sample test. |
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