Approximating the Effective Protection Coefficient without Reference to Technological Data

• Published in: The World Bank economic review Vol. 2; no. 3; pp. 349 - 363
• Main Authors: Conway, Patrick J., Bale, Malcolm
• Format: Journal Article
• Language: English
• Published: Washington, D.C Oxford University Press 01-09-1988; World Bank
• Subjects: Approximation; Coefficients; Corn; Crop economics; Export subsidies; Fertilizers; Input output; Protectionism; Rice; Tariffs; Wheat; World Bank
• ISSN: 0258-6770; 1564-698X
• DOI: 10.1093/wber/2.3.349

When proposals for reform of tariff or subsidy policies are made, attempts to predict the effect on incentives are frequently hampered by the need for input-output technical data. This article develops and illustrates the use of a methodology for approximating effective protection coefficients (EPCs) when such data are unavailable or outdated. It derives the equations which approximate the EPC from statistical analysis of a cross section of existing EPC studies for four agricultural commodities: corn, cotton, rice, and wheat. Informational requirements for computing approximations include the nominal protection coefficients on output and tradable inputs and readily available macroeconomic data. These approximation equations perform well in an out-of-sample test.