Methodology for Measuring Protection and Comparative Advantage by Ronald Yacat

t_o_d

_mmon the

to al.,i: of

sector

the izdlvldual

compa-_oat£ve advantage

the

of pr!c_

/r, terven_.ion policies

sector°

For _,he former,

sector

on the

t, he _easure

_'esource cost, (DRC) of e_rnln_

stud.lea is

and_ retur_,

further, to

as attempt: to assess to measure

the. producers

in the.

foreign exchange,

For the

nominal, pxo_e,ctlo_,lrates. (NPI_,> _ i_pllt_.L .tariffs (IT), ef;ectlve

this a'ppe,_._d..ix, _e s_-

and.pro_edux,,e_ _:ha._: were used. we a_:temp_ to clarify well as t:onoto

C_apara_ive £n savi_g sxports

•

Inthe

_ut ........... to acco_plIsh

protectlon

rates

to est_a_.t'._

pro_ectlon

.(NEFR) were calc_llated.

-th_.se. measures,

In add.ICion, as

and Impl:'l.cat_ns of. these measures,

_xchange

r_fer_,

t,:_ _:hv reined.re

_hrdugh

:t_.porC

long run the natLo_ _h±e

_Ith maximum

_fi,:iency

_b_:_ut:h;n

_._s.e, _, " • ,.a._.aace.

or it_

activity

ea_:xzJ.n_, it.

foreig_

through

exchange

c:f_-te._;.en_,,7 me_s .to do_:_o at least

:.used,.Accordlngly., if O_e actlv[ty

Less at the margin::Indome, stin res_x_rce,cost_

advantageous

latter,

c-oresof-_hel r sbO_tc:_mi_-tg__.,..

In social value of resources

_oreig_ exchange

ou_: _ha var.lous def_m;ifloss, assumpt_ons,

the meaning

advantage

foreign

e£fect

_sed-Ir_ _,Ii:studies was the domes__e

and. e,vL_

rates • (F2R).,_armd _et effective

the

than a_.other activity,

budget; cost

requires

to save or ea_:n a unit o£

the former-is

compar_t_ve,ly-

In relation, Co _he latter.. 'l_:_-us ect_,vlt_es can he ranked .at

e " ReseBrch Fellow and Consu!Lant, respe.e£.i,vel.y, a_ the Philippine " Institute fo:_ Development $tudles. _U'_l,_. short paper is an appendix Co the PIDS research study _mEconom_,/ Policies and Ph_.llpplne Agriculture conducted••by Crls_,.in_C. David and Assocla_es,

rhe

margin

(_Ooai_

accord±_g an

-ORC_an_

_o comp_v_tive

ac_ivi_7

_£_h

a. l_,_..r

_he s_et,_l.

reducing

_iT_r_at,_e

bT comp_rin_

D_C _,,_ _efer_nc_e

eo_t

6,_!aucinp;.

thei_

to. one _he

ORes.

with

for:ei._n

a high_

exchange,

budseCo Formally

border _he

p_ice

n_rator

curr_mcy,

so Chat

_he ac_ivrt}', wit_

.o_ o_t'p_ local

the

foreign,

Currency,

res_f:

i_,

£he-aha,iOw exchaSge

ra_e

co_t.

wh_le in

where

_e haws only

_r.adea goods i.s

_:he DRC wiCh_he

X, _e z:he qus._ti_y of

_s _he _moun_

is the

is £h_ amoun_ S _i,3cht

pri,_'.e

pz_ice of

o£ _teriel

SER i_ rel,£ed

price_

foreign

ra_e"

for also

o.f do_esticpr.ima_y ex_:han_e ra_e_

snd

..n _S nez soc_.a! __r0fi_.ab.ii.i£y0

and

'iS take_

to £|teconce_t

factors

(labor,

_:,o4s can be fl_composed

Usin_

the follo_it_g not._t_on;

th_ our,pot,

the e,,_r_al

i,npu_:s,-

£_pu_.s used,

ohade-_ pr_,ce O_ ,_ome,_._..e

ehodow

ut{_er, but

Output,

P. is the _L_adow (5order9 9" Y

exchange

t_"a_ed.Ko,-_ds_nd. pri_icy

_nd pri_i_:7 factor_;.> (border)

"o_

'[_., all activi£ies,

[Conco_,.,_u_],ly_ noo-_r_de4

_he sha_.o_

i,.n border

(SE_,), %_hicb, re_r'esents a kind :of average

_:.__:_ationally

ca_it_.l ._n_ ].m_).

the

out Only,_i_:h each

_he aest_ e_ o:b£_i_in_ fore_i_g_exchange

|>e_- uni_

t:he _nomin_o_

ef_ec_'_

DRCs _ar. b._ c__-_d

The ce_ison

into

_i_

primary

factors,

[act,ors used,

Tl_n

This however,

general for

formula

compmring

a_:tivi_ies

hi_her'to_.a.i,._ simply more

output.

u_d

(or

project_:):

i_. s_t_.inimg some g_)al.

exchange,

•

_ides

ear_le_d..._,r.. :._aved J

. _

sides

(value added)

gives.

•pd D

have

resources' _'md producing

This

m¢_ns

are

that we are

(P X.-P ¥):, '_c- have

comparative

Pd D p R,..PY

D per

uult

_ s _-DrdC

fozei;g_t

of eqt_._ [liOD

(2)

( l ) by the

va] tle of

primary

fact,ors• used

DP.r_

equations

(2}

and

(3)

give

.ORC a_ ,_he ap_ropriote

measure

,_dv_m_age.

Fina.lly_ _e could ,_epar=ta _he primary t, nJt Of each.

s_ed..

B,at "

pd D

th;__, both

ex¢:hnn_e e_rned_or

zquati.on (_) by X _,_jvesn p*r:sni.t of output°

divide,, bo_h

Dividin[;bo_'h

No_e

might

_ot £n _otal _-.,_ b u_ i_ .0.per _mi.- of outt_t,_ or n per umit of

tio_h _ide_ .of

Instead

activity

Grem_:¢_ e_fic_enc_/ i_,pl.ie_,h_owever, .tha_-_esources

prima'c_° _._c_ors, ._r t_ per _n-i_ of foreiK_ Dividing

O_e

bec.au_e iC wa_ usi.n_,more

productively

interested

_or net :.;oci_lprofit:_bJ.lity Is noc useful,

Xf_ a_; in the .Philippines,

factors

nrdinary

and calculat_ labor

_. _er

is considered

tO b_ W¢

are

capital

il_ surpl&_s _ae.t

supply,

concerned

and land.

_£ Would to

Dividing

not

ec_no_.ize

make the

both. sides

sense

use

to .do this labor

equation

the

with use

labor. of

(I) by the value

capi,_al, •used- g±ves n per •_•it o•f-•capital;•and •. ••tha•_ •re•to of Interest• wh£eh • .

- •

•

. . •

:&Ite_:nat_v,_,y, ._:i,v_ding bo_h.._ide_••• by. ti_e _:.tl _i_

. ..

of-land

used g_ives n pe_

.o_:Isnd_: mid.._hat .r_nz:aipr!c_ .o.._ la_d. that...would..maken-0 •might be

Cal_e_..i :_h_:_"own-l_n.d-z.e._t '_ of hhe act±vi_y; . .1. ,. ._ ..:" .

.., -

•All. el.-_he._ _e_es. i_a_ify_n_

of. so_ai

_rofltahiT._y

are ..con_isten'__n

a_Ivi_.les, tha._..are_oclal.lY profitable

or uuprofJ..tahle_

.are =or equ_valent_ i._'_ever_ in rankln s px'oj.ects, _.fthere eons,_rain•t ,• _ • , • • .• fo_elgD ..(capi_e.._.._.-.la_d_

. •. ..... exchange,...__. _n4)

_ncl_._io_ in the _nve_ment •

of ._.l.i " '_'" soela.l._y " " '" prof_:able .

co_rai=lag

budse_

al_e.u_:.:_ _he _iv!_

They

i_ some.

£h_.t preelude_

, whether-it-ib, de_mnd,

act±vlt._.e_, .

capi_al_

land

or f,_rei_..-CxChan_e;

ge._ral

cr_i_:er,lon _nd• _,he_s•_. _ Of O_C •ha_•been::cri¢,Iclzed because •it •is••

no_-e.o_s•i:_ten_•_.I_ •raz_king '_r_._h •the•.for_._;.r. •Yet •for •_terDati_nally tradab2_e ._oods output •.all

aho.uld-uever h_ the lli_icational •factor,

the outpu_, we can Se._ subject

to s_me r.e.sou_cecoustra_ntsl

. •

tradable .• _oods-_and•S._r'v$ces, ._ cos,s_:."._ir_:

course,

•a.ud this measure•m_F_•t

d_mestic• demaffd would: repreeen_ --.... appr¢_yr_te

well be the

unit of ou£p_t, mights_em

_val_a._ion-of pub!i_: proje.cts re!a_im s _0 ,_.road ef _: def_a_:I?..% ie_tb_ for _ex_ple,

But

f_um

one.

;_.._s_ "._ .ItJ.s"¢._.ea,,._y "_ "+" inappropriate,

__ocia!

p_cofi.tability is _'_heapprepr!a.te .one for

. Rather.

its J.eSi_imate ,so tn

a _/xe_ quantity of.water

i_.-eva!ua:'InS-ac_ti_i_le8 producing

•-••

The

. .

t.ranep.orZ,water ,uPply,

traded

-advantage,

Foz"non. ,

...

pop_-l._.rityof h per

We W_nt

e£.c.

for a village_

_,te_natlona%ly _he D._f,_e.asure of

._den_:$fying

comparative

•Ca.pi:_;al and•land _re-b_tzh rei_tively ._.;¢_'_e• in •_hePN_lippines;•. _,t .

_us_

"(3)

u_f_I

a_O_,

D_C

¢.o_...

The_¢ are

First, i_ .is-t_e

choice.

meet

perhap_

widely

i "

e_pecially i_ .] es_.developed

for

_.rposes-of

_:h_,

releva_l_

_.omp_r_son.

a IS _ t _" e

Second,'

its

_k_

ehis-

_f =ompa_m_iv_ _vantage,

cOuntriee_

_U_i_n

for

resour¢e.

u_d. m_s_r_

reasons

domestic

prJ,n¢ipal,

fo_

,_hree

•have o_ed

_h_ c_z re-_ttof agricultural _c_,ivi_ies

S:O

I=_g:e&d _

_hi_ _ea_

for

'£_

_[gh_ _

cons=taint.

• .'"

for _grlc_l rural ac_ivlt•i¢_ i._ndwe_id •!i,eth_ _:_re••ii_-_nt

bl-_W_'_

the

l I_C

0 If

acZivi_y

• ..

agricul=_al-_ctJ,vi_ies

ehedow_.e_ch_ge

._he

and

_i'_

ClO_

IWe

'_B

_elVe.._h_i_SS,

.l:h, Other..

•

"'.[

..._

• .

1_na,_

I _'*'_ay

•

relation

the-

aO_

•

,0, _

.lra_e

clhe

l•

are.-n_t _sy the

ish_d_

tv ._.aSure .ffi_id-we. 4id not. a-tt-emr,t t_-.make-"newestL_atee .o_. p_i_e_:.Qf... labor, -Capi•__atand for_s£gn-e_xchange.

rel£e.d •where .neee_m.aryou

the previous

Sa_.io_ai._d_£c

_ther• we

work :o£.Medalla". (1979) .and .the

_u4. rhsvelopMent Author£ty...(NEDA) 2

The. Shadow"wagel r.ate va.rled •from:s:tudy to stud•y, depending.._n".... '.... •particular

labor _marketcOndit£ons,:

-: Where 'the_e .wasa. relat£yeiy - ...

wage .-W_s.aasumed

.imdu.szri_I:sc_vit__es. _-

.... S:_S:_,. •wood processing.. . .

, rket

:...

•

. "

Hanalayssy

• -..

(1979)

• foreign

i- "

. "

•

_.-

....

"_ • .:

. .....

. ".".:_ ":"" - :

• -

. -..

folZO_£_,sof" M_daila = ... -=_ the:work .• . ...... -... . "-.= .."-

th,t,t z970°, • . .

. -

.... .

•

: :..

-..

._'- -..

•

. .

r..

in the I-ndustrial Prom_ti_t'

the.

early 1980's, . ._.._-

O- er r

be. in-th_-'range - egc.hgnge . -_ _- was. .. taken_. to

•

"....

• .-..

.'.

.....

(IPPF) _-_.o._e_:t.. :

3:be shallow _rice o_ . . • . •-.

-..=.

: .

,PhilipP.inls

•

. _ ..

. .

•

5 _= .-

_1979_ the ,. • ... in . . ..IPPP . prOjQ=t.

. "

• .. -

. .: .

._ .

" _',=_."

. .-

-..._ =. "i"" =:=

....

: ....

....

•

.._--' T-_e."SER".emti_-i.onw_ •.

based ...

.,..:

._..

.-.

-. •.

prices_. ....

....

" -

(

_X_or_

•

•indirect .taxe_._ It- :did .._ot -:t_ •. .. :

:..

. _.

'iintoaecoun_ ... ....

. -

...

any_ element . .

in. the,foreign • _ -

exchange

._r_et-, I_ .Other words,..- _ ..."

-gssump.tlon-was ...that .the official • . .

. . _ "

tax,_, .and ,...= .

._...

of disequilibri_ .:. . . -:. .

the ..

.... _

ra-te_was ._n equxl,-brlum rate, .bu_-that "..- .

It wa.. a d_st:orted _quilibr!u_n_ .with,upplies: . _ "= . -..

•

. _

to. the etf-ec_s of _ariffs, -

•. ..-

++t..tli¢.di+tort]om o_: _rket _

....

discr£m£n_tory

•

....

from.b-orde_ prices.ow.ing _.--

•... -7

°i.S i.ChelshidoW, ra_e..tha-e -HKDA -_a.sused- in.-.

• "

•d:isco_t.-e-_t:im_ted: by

_-..

wage for . ...

....

•

. .==

to.be. 15 pe_. cent•... Thfe

Poli¢£es

" ..

.:the shadow . .':.

zl9

•

.to'..equai the -sfi_d_ .wage,:-: For

•

wo,p,..,t s0 _

....

izzea:

f_ee.._ ....

•

labor .:market, .the.mark,t

•

and

demands

f._o_i ]_Oz-':ignfexChange .. .. . - -. .

_._ ._.

• -.

....

• affecte_ -_._ -w_io_s_ _r!_e'•_-_e_•_ _o_._• _o:i_=i_,-__-. >-•• :-•_ _ ••_ould •judg_ -_ Ch+_•_ •_-.,;/• .

.. •

.-,

• . =

. : .• i. " • " . :. -, . . . .:_ :

•

•" -. • _ _• .

- of.• ••_hle peso)_. ••o;tr •e_ci-mate

:the •-s_bsequenC••d•e_reCi_cion

•.

....

-:_fi:'_'. -- " - . .:._:

S_R wou1_,:be, " .... •

of ••:the

...

...-...-.• ..... .. : .. _

• .

•

_=.

too !ow-for _:hat--_p_er_od; ._

• ..- . - ..

"? ..-

..-.- _

The-shadow:prices:of-i"ncern_t_ba_1iy cradaSle :good_ _ere taken:to:i_•.-

.....

-.. -

' .=i-.i::: . ':-

..the_r---bo_der p_:i_:es--":FO_.e_tportp_i-ce_ and .C]:F •import pr£ces...These': _.. -

_ •

".= .._-._. . .. ".. :.- .. ...

.'. .

rep_es_h_ -.

_. _

:_the

..-__

. ..

:. .. = . .

. -..

•

,6ppor.Cu_i_y

...

......

. --From. a vorl.d .

.di_torted:by

....

_-.

,ome

in _ri,l.

. " .-..

._ . .=

=_..-. .

--..

... -

" •

:_ae .-considered .... •

.. - :

=ar_eCg-i_ud

: " -" : '

by :_he.. p_iic:i*_"

....

- .

":"

.=.

• .

Of :-: "

7 '. '-:'-"-- .

oppor_ttniC.{*._s ...

.-....

: •,:

. _

.: :

_*k-e_.q....l_

• •;

. :.:

...

•

art _.sst_e. h-c__.ve_.•

whet.s_ t.a= : Philipp.in¢_ .genaral

i.t

::.::•7•:-••:•••':: •••i•: ::

•• .• .

'..

b_"i_pro-_ed.

-...

_._.i.wor.i:_:.

••_ -•--- ._• .'.

,L_' .

-_o -_k,i_ _oUld. t.*e. tno_,e C:_es

"."

thems.etve,_

" " ","':: .... " " --" --" "-

deg_fee"of:-=¢_op0!y-po._er

• -•:.• :. •.-.-•:.•

the _u_e of .-

-ghese."_bor-d_r :-:p_tees might

_.- "

-•_•••.•:•_:•-: _• .... :. ••..... ••••: "'...

economy,-for

....

. _m: eXe.sFelon

. "... " ..

._:_zteh¢_e

MF_:-:.stld-(_A_

oF.pot t:lni _ie._ .tha C .t}m _iac£ fin- .mu_"t =ake :as.- givert '.. ., ., ::.'._.::_-____... _ .:.

•

mouo_ly-eiements

repreSen t.._h_: _-_ding •..,, _ -. ." _--_.......

vie_ooint

.......

•

-. • _

Coats-. t-o ',the _Philippine

_the-st.. goods: .

" . •

•

:_i:.-_,

•:,.

• .:

_--. • : ..

coconut

: -.

:•

• _

wa.s::judgt:_d

:••

. .. . •

".. ..

:...... ...

...... •

•. •••

•-•• _ ••• .....

: . "_ • ._

.:h,is :

. ..

•. •

•

._nd_.,_cm ..p.r..oduc.t_. _.... "-_-:

..-

_'.:

- .....

.....=....

the:..:imp1icaCion_ -._ece. .cak_n:...:_,L o.a_c _ti_.: ,'A parcicuZ_.r-dil:1:ieu;tcy. uir.h._-espe._..c. _O::b.order pci<:_ i_s_che:.o,_-.-: :

" • -.

• •.

•

_..

...

. .- ...

• •• _• _..•::

-.. _ .,.... 00_

" _ "

_ . ._ .

.." .

...

•

. :

. .

•

. .-

•

"..

-.-=

• •

._:

• :•-

•

"_I'ChOU.

•: "

•••

•-

"_ua,tifiC'aC'_'O_

:!:

o--

'•-

i' -•

-:¢_hlez'e-:l[hiS

:::-:

_om_ogen¢.iC._-!does.• nbt.:, exi-_t. _._ome....,_ju_t_,en_-mU_t.. • __

..-

:h( :ad]ustmnt-.di.ffere_i .

•

.: .

•

..=

f:i-om..st.udy--_-6

....:. ":

.._ ...

.= kind

- • •-:-

:Of.

.....

-be":mad.e.. Th_e -nature ., .

.-.

_ -..

of.

.. ......

_tdy:.,":-:dePend_.n_, -oa. particular::

,..

• _

:ircumstaneee., ._

_ •

l'USed.

• • •_• ........

".!-

. "'=.

Can-be

lplrl'___e_S

- _ •.

.'=_

. ..'":'..'="

..... •

_ Sb=_-o_ . .

": .. . .

Che..-_tot:e.-imporCn,it .

• .

.... --..

tn ;the .*ecC-lon on prot_.ceio_. •

appz-o_aches..aire .

•

... -

discussi_d-.he-iS_:.

....

-....

•

..:

• _llcies •

gr_:clud_ import-or •

•_tO

tra4able

_efle_

goods

.[_o._:t•ch _-ithe_•_••_tra_@port costs ••orgoVernment-

e_porto

...

a_d

p_imary

ass,_e

_ha_

_ai_tors_

those of-_,he .!a£ter_ The

stud ias_ i_ to

C_n_Ji:_-,_lly they c_uld

[_.:..

a.[_:ernstive_ which

'l,f-non_ra_a'_le_

t_ir

_arket

%,_re ac_a_._y

' .-

prices would

shadow

was followed

of using

an aetivit_ •is t.he v=i_e, of _b{_ir use elsewhere

be decOt_posed

th-::_t, their

the oppo_tunit?• cost

_his va]u¢_ is r_f.lect_d-_n

In all:

no_._radab:i.esin

ir_ the econ_y_

and ._hat

priees_

decomposed..

:{n_:o tradab.tee

an_-.primary

• . .. •

faeee_r_,

:_nd i£

_here

<¢ere

co;_._k?_ts:_ on

impert?_

•.

th_oretical wasnot

•}mdow prlca_

exporta,

:i._ehe fir_: se,:_aion)

a=,d n__t_"ad__b].es we:re ._n_l_ded

ea?_n :tO b_: represe_eed

. .

do_esti_

mish=-, be

In:ou_

b)_ •their market •

di_cu_sio_, above

_o'_

s_udies _hls

costs

with

PriCeS,

_heir

not v.d.

. ,

_bOv¢. .-F,_ -_ra_ableo_ .two _t_,r._,.=..xv .... a_proacnea: were-e_ployed Co_t_

i_t th_ hia_orical

n__ _._o_'._ai _ ' d_ta. actlvi£y prevail, In

the

Thee

me=_i_

¢6a==

were

is, it _as assumed

aliocat_d on

ghat wi_h

the hlstori¢o.i _rc_por_:i_s of d_estic :_hi._ Nethod f_,few

eases,

was

uaed

al_e_native

_fful!y-trade,l" _e_ho_

all _RC

in allocating

the basis

the e_pansion

o£ an

and foreig n _ources

Wo_id.

s_udies, est:im_tes

of cost. all¢catlon_

were

made

the

In .this case_

inputs arla alloc.s_ed _o f_._reign(:e_._:,_he assumptions

hg_is

all _radab1_

behind

this mathed •.

are that. _rade. _s nt_ controli_d so

that • . .ex_nsio_

of p_.,.4u_£xon .....'" ..

I_S_

ax_rts.

a.aidthere anywhere

...

no ,lack ir_ tlie e¢_nosy,

would require

imp_.t_

or - :.

11 :

cu to

a hiSh-r: (qu l:idj., s.tad) ido, stipride m

...-

... • .

•

rmlative •co uorder•.price •.••The .r-ea_or_ i,st:hnr_ _hen •t_.e •du_tyis imposed ••

. .

. -

buYers _-£IIdivert=demar_d tO.-Chedement.it:_,er_ionuntil i_.sprice_has risen •

..._. _..

..-

•_

...

. ..

• 'eomp_ra.bly. te..thedut;y,-in_[usi#e _pr_.ce_:.fthe •[:o-reign... p_od_._ct,A .quot.a •i.llhave.a aimiiar-"ef[ect

.byl.-d-£w_rt£ng _ema._td-.to. the .domestic product,,... . -...

rheprlncipal

d-if-feremce is:-that wich import,duties...tge .government _eceives m

:. _

.. _

-...

r_venue; while,with quotas-..£Cis the import licen_ee s who gain° Caxe_' end qu_t_ha"_ tb,. opvosice.,effe¢_, depressing the._ • ..-. ..-_.."• .-. .. . -/ _ . (qu_t_ty.adjusted} " do_estic :p__£e e "b_iow border _r£ce by..diverting:su-pply E_ort

•

.-.

.<.....

•

...

•

to thedome_t£,,: _arket.- Agai_.-iwirA'_ the e_:portt_x:it _.s_:he governmenL _ho gain_ c_venue; _h'il__i_h.-q_ota_'_he uindfal.l.goes to the export. • ..

v-.

• '_ - '_ "_c:_n_ee=. .-

" .

•

• .

.:-

.=:

" ..

', ....

.: .

,- .....

.....

,,-.-.2 '_." i-

-. ...

...

: ' ....

•..

•

- .

and li_tern_.C, iO_ai._arkeas_.can aia_:

Create _ wedge bee_en

domestic and m

• ._.

/:.

bo_der,

....

.tn_zr prices . {af_,r.. q'_ali_y"ad_ustment} by-i*_"

• .

. .

pricing"pol_cies., -Suci_

=gen=i'eSexls.C,is:the Philip_i_e_

•for rice, corn, wheat _:•sugar,

cotton."and _

t_bace.o-,.

Zn e,ch

,m,_O_g.othe=s,

effects

made-.tO, measure the -.

the. rel-evant

e=tud_.es"sn

•

.......

betWeen-"dcn_emeicprq.cea,d border p'fice. "

. ...

_ .(,enerall.y.,. two measure_s cf th_ wedge

"._

" tariff

(£T).

•

. _.

•

... -.-

between domest-ffc., and border price. (NPR) and che.-implicit,._

•

Boil1 are .meast_red •as a pr:q}orti.cn .v_ the 'borderprice,. The .

._.'

for_r

have-lbeen-. used :_ the nC_i_.na._, protection,rate .

w.e

.of ¢!heirpricing policies on .therelation:

•

a_Cempt

....

upes as domestic price tb_ ne_.price.-to-: the:.seller;.whilethe:_atcez _ ..

•

uses .the.price to the buyer,

'..

_.he.former is.often lower•_.hanthe la.Ctez ..

.-..

.-.

because of a sale.qor. exc_se c_x. :!.tmay also differ when-government •..

.I _¸

•

_trk_r.ln8 agenc._e_t_-e.c (o_-induc_> _fferenc •

pr.ice_co-_eilecs and buyer_.

. "

".i.."

" "

•

"'-" . .

__"_'_US_.

" .

• . ....

,. :" .:.

: ..

_ ..

i,r-

•

...

•

_h_ 4_e_t:t,_-pr_:e_:

of: _crat!ab-le_ .-

_d •

,ao

_he p°_ee_[ve

•

Whereas prices

. .

f'"

_:feet

-...-''"

such e_t_a_ng_ ..

_f= _r-ice :.-

o_ the:_r_ce_ .

•

are

Ch_i.eonstraiued

•

_.-

exception,

however

.-.

...

-..

_nterVe_c_:on

n:ontr_dables,

:. -

-..

n accorded

-. •

chis

_as

To-meuure ..

Co c mup,_e -of

•

_pplie_ _

•.

• .. •

are .._

--.._.

_e _g_ne-rally

of uontradablee, " the qu_s_£on

aa .input •

. ..

. .. ..

e _)del

Chac wa_ deve lope_

:.-:...

and ZT, two _p.r_aehea .

"__

p_ice_-direct-ly-_-d_.,_e_ci_

•

_cre . -

c a_._

e_pl_yet_.:

-The

f_c

berder_

the

case'- of a _u_ber

of CIF _o_t

A second., tax

• =.

s_ve_a_--ca_e_

unit

were val_es,

no t:ably.. Hongkon8.- and S£n_apore

sales

....

Therefore0-

g_?Od i a_d .

Imp.orCable._,-i_por:C_

use

there

_:c_mo4ity-that

Che p'coceSse_

ap_

.:.

• .

• :

M_eure

. .

p roCectio

-.....

• .

•

pol£cie_ -

Xe-£h_-caee"o:_-_..no_.adable

• ..

....--

by -bo_rder

• ._

...

assume -that -cs_ee and subsfd-_es =O__ passed _t: by _he sellers ' _:'_i: _ .... .... ..... :/:;2 : "- ?- i- - _. Mor_eove,r_ " _ine_ _hece _re ,_o. hO_d_,_-p_Ice__r uontr_d_ble_, •

Pal., t , 'b

•

cares

tud£recc,

• ..

•

noC ic and

su£ficienC i_6_r

-_--_ere

pz_es

the

o_. _thec

justify _ia_

the councrie_

uaed.

mstho4 was to a_U_e,

would measure

quanC_.Cy_ te

p ropor_ionat

chac ..

_he knov_

difference

Caciff

bectaeen

s.nd the

:...

cvo

prices.

For perE_cti_y

13:-

h_geneot_s

_l_e_ marketing

goed_

costs

are" zero,

the.two .mechod_.ahou.ld-give tl_esa_. results,a_;_..-:,umi_q.-.free competli.ciOn,-.. That.is, ac _he marsala, _.-bu_er._ sho_itd f_.ce, the .Same"price:.foridentical " "•

•

•--,•

••.

good_ .fro_eithe.r source.,". .For"no_~homog_k:ous go_dd,_.-_e _ssume _hac the .

•

•"

• -. - • .

••

: 7

••• -•

•

azld _rice dlfferent.ta.l_.

wedge z_pres_n•tsa•Comblhed •q_lity

• ••

Si=ee

•..-

a_ri_Cultural_c=mmod..it._e.*_

• •

-•'-•

t;endgsnerall.y•itO .bemore ne_.r%y

•

industr-iA:l..g_odS._,

homogeu_eousthan

...

i_hevarious sr_ud].es.did .include•dlr_cc

pri_cecompnrisons. _-in most:.:caS_ the ir_dir_:.:t:met_od was also employed.-

..or comparison.

making p__._ce "ll_ "l comparisons.

wll'_e" " :

"_l_.rst, either

- .

•

. •

. = ._

s-buyer

_he

and

• "

[

lt,l_'O

SU_

•

That •

.•

comp_rnbl,e

"• •.

••

i ::-

di_erential, during • •• .

e_fect.-(i_

CO_tS"_'_._

[

kin

adjustments

•that

pe_io_

Pric_--litlterventior,

the

Iex_ s ___ .,l and

assume

policy

t_as.__o_.

•that

•

¢||_s

differentia1

The

_WO periods.,then

the price•

differ._llce"betweerl

.effect.

"• .

during-che period when the .price

aZSO.

the

differeRtinl

i_'_

wag

point..

One means-employed

-•. J

quality

• . •.

sources'

.•

p01iC_,"

•

ItO_ :.

._q__li_ydif_erentia] was to measure.,t.he: price-

di_.f_ren_i_-_

aIt_-rt_cives_

:a more serious problem,

interveution

bOtll

represents the

pzoctical

sUCh

adjus_.ed.

# i'

perl_:Odi_en

•

represeb

•

market£ns-cha_:n,.

•

sho_Id

-_QN_lity..diffe,rence_.:pr_sent

l_ sc_be

_pric_

.pO!n_R

".••"

_nCl_d_._rke_ng

should

border_

.r_p_ccive:i__i_eS

of acCe_pt_n_

the

r_pr@_sent

markec£ng

Conside}.*ing

Che...dO_£c .. •

_he

be necessary

_y.

_lwX_'l_S

_lwO

_q_rkle_lin_llClOs_ll_].re.

ho_e_e_,l.l-_nd

. .

i_resent,

taken.

represent,the

effect

i _

the_lpO1iCy. There. _s a tacit assumption,

di£fe.reutial-r, e_Mlin ed '-Co-nst ant _

. Ofl-course,

•. chat

Chel-qua!i-ty

i.4 -

-I_ .should

be _aphas_.Ze._:__:ha.,+:NP!L and _-'.. c.._n _e-negative.,.

as welt

positive. •Indeed for _griculturai I_ro_,=_s:_ubjectto export tax or of protect__o_:tended to be nesative,

'govermm_nttradin_ ,monopol_,as,est_ntes .-

. .

•Table I st_ema=iZest|ie_vrocedures•_ploved to +measure NPR's a_d IT's.. [d_ _be Various sectorS:cc_nsidered in _h_-st-udyo Eec_ors I to !4 repre,qet_.C _

"i-.

" "

•

ou_pu!;s;while 16 to 20 represent the _a_or inp_Jts.

...."

-+ ._5

p_®_t_:___t._, :_:_ _._ri_:[_,_G-by _o_i_i_,-

•

21, c_

•

: .:.

...x _

Pc _t

_ ... x_

_" _-i_ "

Yiah+.

_ "

. :OZ,,

_c'

XR'.....

?r_-"

-_._ -

. :_z/

•

,'_,,.z_,. .

'_r,_lt

f.s_)

:62 __d

._z_c_i_:

•_.:s..._ .c,...,__4.._,, .. 5_. - ca,.,: o_

(,_zi_)

.-.

W_.

_o. _p

•

11,

Xl_

..... -

Lwmb+,_

13. _oba(:co

_[_t

15. s_r__ 16.

17. _T_'a©zor'a

:.---

•

?_p ..

I_-_emz

...

+m_ .

_c_Im

AIIZi_._:t

-,.:

' .

. _

R,R'

l_, __.,_

-. __r_

.M-

_o:_ _z+_ .-___ =--Ti:---.---.

, -

' ..-_:_.--_ -- --.:--_,-r.------.._=.___:.:. ., :p.. :: "--"-,-,-..-,,-_ '-_ _----":_--_.-- ""_

b-/PC- _s_-r._ _I_,_I._; _+r_O_or e_rt

. .+ +bor_1_sr+"

_Lff

_::: -_-<:_-.: . .......

_.._ln, kLzm_ ,,m._ l_Ul ,

Table for

2 presents

irrigation,

(Hedalla

the

implicit

fertilizerand

and Power

1979),

tariffs

feeds, based

for

these

on the

tariff

these

are

taken

and

tax

major from

Except

inputs. the

structure

IPPP study for

t974.

Since the latter changed very little up to the early 1980's, it was felt that it adequately represented _he protection str.cture for the present study, The implicit tariffs for fertilizer and mixed feeds were computed frcla

price

Because

comparisons,

directly

for

fertilizer

and indirectly

for

feeds.

of the heterogeneity problem in comparing prices of mixed feeds,

the implicit tariff was based on price comparisons of .themajor inputs. Ro_ver., this implicitly assumes that the implicit tariff is _issed on by the

feed

industry to the Zivestock and poultry industry.

For irrigation, the

actual irrigation fee charged by the National

Irrigation Authority was compared to irrigation

investment.

un annualized accounting cost of

Irez_U.Nr

ASz'Le_zuzJd.Cheulr.,_

kid

Yr_w._ov

pwp

46 .

r_Ls,

l_Mtmr

oi3_,, mid 2ubrLe..mu

61-

----

_ .i

•

"'_

F£rtally,ef_ecci-veprotect-ion:rates (EPR) were-calculated for some acClviCies.

T_se

_aure

the

the final producC-, _but also

ef£ects

Cake

not

ouly

protection

into account.Protection

•

...

accorded

the inputs

i.toth,activity. _e for_r(i_itispositive) acts _s _ reward:; .:. .

• .

ehi_e,the latter :(asa£n ,_if it is positive) acts asa penaltyl. The

nec

. .

- .

effect £s than on vaZue added.... the difference between r-hevalues:of.. • ...

, 7

ouCpuc and inputs.

Thus

:EpRj-i Y

....._=. - i

(.IIi_To ) -_EaijYj(l J x.l

-__T. -Ea..T. " ."=_L_.,, _J__:l ?I_-_a. _. -)3

....

_he_e _j iswlue (inbo_rderp_icas) ofouc_tj .

=._- .

T£:is the nominal Wotec_io,_ rate. - _ai] is C.he' a_greghce-value of of .output Note

Chat

the

protected prices and

i.n the

•

- ,

ag_icul_ure •

inputs {:_in border prices) per peso .i

£:,[ret

te_m

the =right

.the.den_nin_cc_ is value added " "

!_pu_ i

numerator

Sincein

vaIue

added

in-,

in borde_ prices.

• •

thd_.proportion .

value

iStermediate

£npuCsi

to Value of:output is-Sener_11_.:, s_ai! (i.e., r.aij_s sma.ii),the:EPR •

usually

not . •:very-diffe_en_ . ....

-protection rates processing of

the

sectors

_co_

the-I_PR,-.Tj, .

for.agricuitu_'al:indusCries .pertain

input-output

farm/farm-level data.

data

.co c h• peried difffer

Estim_t_

includ£n frc_

.by ind.str_es

1975.

o_. effective

8 a ::number of The

depending

reference

date

On- available.

The detailed explanation of the nature and.=Sources

o¢

_I-0

data

Used

ia . Cn_-th_

fnfliv_.duat

i_.._ :. .- ........... _¢_'-studies.

....

project

ha_used

Fa=_o_.cm, .....

" ..-

..:

general.,...tl,e

' ::;-: _ _ '_ d;J.tafi"o?! ..... .exxs't_-__..',_ro-_eve... .the..Bureau

of Agric_.itUj.::al

the Speeial..S tud.[ ie_.'._ Div isi_t_,of thai_Miniat _ ..of-..Agricnl.tu re ,.. . • . . . _

I:h_ -lnternati0nai ...-

.Rice Rasearch

_..-...

_ __- ....._and _._o :. l_s.._._u fo.rth_

l_vestock,- pO_l_ry - .. -.

•

and forestry

sectors,

- .

ilF_.r coCg._Ut oil._dcssicated ..

_h_

pr0duct,

_rojee.t in corn, _,_gar.

and: o=.he.rprocessed

1976 "inpu_rou_put

However, •farm

_,...

sur_-eys have b.een_.:¢onducte_ speci_ie.ally _o_"the

_COCOnut,

-In ,.

inp_f_0utput

were

bP.sed

o_.the

table, .

The •es_immt.ion _ '" e _. _:., . .: of EPR is re___v s..i_Ipie.. 0:_Ce the .Tji.sand T i ' s " .

'[.

•

.-....

are de=ermined..--.Tl_e. me thodolog :.[__; aI p_-ob le_,sasd ,...

'foilow_d

. .

genera I.. Droc edu re S .

•

. " " " i Tj _.d Ti. hav<_ been-d:i._:_dussed aSove. - In.. agricu.lt,,re in quau._fy_ng .... .. , [

the

. - .

es=ima_._on of.KPR . is ..simplified by _he f_.i ..... C_ :-that mos_ in termed_at_ • . •

. .

._mpu=.s such as _ertiiizer _ agricultur_1 I.c.hemica:Is, etc., agr_.cu_ural

.eff_Cive

proCeetion

be...adju,_ted.fOr the t,_dervaluatio_

of foreign

rates, '_ or NEPR's.

....

• ..

where OER i_ .the.effi_£_l .exchange . .

are do_m_on _o -

indus_.r._,e_; ..

"EPR's-.ean further

• r_te,,

..red_ed. _n che ra_.ge..0f ./ to 23

in effect.,._i! EPR's wou.ld be . . . . '.

perce_t

(fo!1owing

) .

the estimstes

Medal!a, .1979) to ge£ .NEPB's. ..:.

• I_ shoul_-be, noted correlat.ed; sinc_ high

tha_ D_.C_s•and _!PR'__tend..to be negatively _ro£ec_ion

:is..gemeral.lyassociated

w-£_h,relative

in_ffic!enCy.

This

_um_s-_h,

J_s_ crea_ing• _xcess

p_.•ofit_

_he

protect_io_

!_-nee

and

.- ,....

pr._ce_ .of pri.m_ry factors EPR's would

5e-iequ£val_n_

equal_led _their

in domestic

and. V i8 vah_e.:•a•dded••in•borderprices, always-fully

• ..

• .

, -

not

•needed and shadow

the •

•

._h_dow prices,

DRC'-s .

For it+ ti_at-.caseDRC = W and"

measure_,

ZPR _ W••- I+ where W•-is;-value added

isno_

and: is

if _+ •is fulJ:.v•r+-eeded, and _Iso-if

•

.market

de4+

•pricles•(shadow _nd'market)

•I,,,_ fact , of:course,•-protection

•

p._ice_ do- not neces_.atily equal •market••.

._.

prlce_.

_ome

Sho_r t.com:in_

While. the..techniques-described advau_a_

a_,ove for.mensur_ng

comp_rative.. -

.m_d .the."Pro_ective .effect (positive o_ .negative)

In=.erven_io_ pOilcie_

are wi4eiy

.of we_.kn_sga_, the most important . + •••

Of p_ice

u_ed and respected,, they have of which

we will. attempt

a number

=o s_marize

in..thi_ f_r_! _ectlg._. First, and moet

important,

is the f_ct

that both , •

measur_ th_z-4o •.

o_ protection no_ take_into

ar_ +_f _ partial ag=oun_

£he me,ny

economy, that are set.._n'motlon

repercussions

_hen price

intervention

throughout g i_

_n. imlu_t_y, jt_dged-to be c_m_aratively

,_.p_nd.. _[_4e_ere_ercu.ssion_

DRC und t.he various

eqvili-brium .n_ture,.... That. is, -

•

when

include

tl*e Or

initiated, .

•

.advantageous.i._ .indueed"to

changes

gOOdS

in reia_ive prices_of

•• •

and _rim_ry well

factorS, ._uhst.itution._mor. N inputs

as nmong otltputs .on the

foreign

exch,snKe rates., .s,d sv on.i.all of whichir,ay'.come hack

to render.

from what

changes

•,

s!4e , as: rates and.

different

side.

On _he supply

in interest

the final .result quite

dz_ind

••

wou:id .have been

predicte_

on.

• a eetezf8,,,, _

assu_p_io_

•

To t'+_;a

i_'-__._- _ffec_-s

•

.is

_epresented

by _he,estima_ic_i

•

of the.

_ •

in the

fmreiSn

exchan_-r_. "_

...

-rate that results from the entire proc_c_ie_a sys=e_. £_ .....

.. •

bu_ _i_: i_[_s •

require

•

giffere_ee

_..

would

: _hort .

off capturi_ag

HOw sariou_ is this

all-

This i__i_p_oztant,

of ghe .. general

equilibrium

If w_'a_e looking only

shortcoming?

,_ _ _eC ..... ,.

at a simple.

project,..or_even a.-slng!e industry, th___nit£al impact will be very smnl., • ..

•

_ .

_elstton

• •

.. .

•

_,f _he _con_sy

:J._r_..,_.Ut -

.and _epercuss£ons

. ..

be safe!--

aSri¢_l_raJ--i[idustriestCge;=her _e ,...

!_ _ss

...':'.-

show DRC'a less

•

. ..

....

h_ incerpreg_d gO:mean ghat alllshou._d

,. • ..

, .

_he _eperguas_en._0_,_. _he-_r!ce of:-la_dwould be sure '..

¢_ rer_e_

_us_ assum_ thatilia

the fae_ i_ha_ :_s-tagriau!tur_l ac_.ivitie

.._,.

than:,lh_eKecannot

Zogether,

•

r_o_._a a_ovethat •.

-expand

If, however£ we _re c_ns-ideringthe whole .economy or even sew_.c. ..

cameo

totality

to-ths

i_nored,

:. ...

•

....

_ome: _d-_ant_geo_'s.

That

£s_ why i_ was .

ssggested

•that

the

°gricul_ur_l 'Dl¢_ he;compared 'w_th each.other::!instead-: Then one, : _...._-

. ..

-.. ..

•

.... . _...

or--a few, icould be selected-fo_- e×pane'._o_ _}i[i__-counterpart .

It:is

.:. • .

adva_,_,

...

only a_ _h_-.marSi_a_d may b_ _isleading if

•.

. ..

:'...

larg.,%. °

changes oer:ur, that _'culdle_d to substantial repercus.ions. -'

few wou!d

..ne_-'e_or-,o _" ,. " :_ to b_ _waPe:_hat " ' the DRC's indicate

_L_p_rCan¢,

c_@aratiVh

The

sene_:_-

.i .

rule is. _:han,thzt-D_C is °good" i_dica_or for chamgas that would be .

_mall in relation _0 the whole .

economy

...

.... :a single-industrY:expau_-ing,, c_"

- 122..-. •The same codsiderecion .

....

.-.

is.important

in.in_-erpretins

.....

'pro_eCtion. .

_The Seneral

•

....

attracts .

the opposite, .

only,

_.'."

•

- so .

.... ."

"..

".'..

.them. .

less

of ..one.

When we. are .... .

procec-cion

very

system, effects

l lkelY

however,

we"cannot..

of price

that

those

rich - ..

_esources

and those

-."

cereals

whole

-Zc is

'As we approach2Che .."

the case

ince.rvontion the highest

". .

economy:

protectionhave.drays t

general-equil!brium

the vhole

proteetim

confidenc.-of..:Chis..result.

the

" .

• ..

across

neSaCive)

we are. considerinz

the e_fectsof

. ."

"low (or

protection.

quite

be as sure:beca_se.o£-the, •

rel_C-lvely

1on8 .as

...

of .- "

.,..

.we can-be .

- cons/der£ns

..-

e_fecc._.

. •

• "

industry

Upansioh

that.. _elaCively_hiSh .

res0mcca_s:".fo_

.='._

" -

has .

presumpti?n

'measures

._.ddle

_:ith .

levels.of

lowest

pro_-ection,

because

the

have

repelled

. .

•

however,

ve Can. be

of possible Counter-effects.

. .

thec:ppZiesco eff.ctt.,e prOtectio .c. .- .

....

ass mPr._ou.0f.._ixed the

var!nnce..iin. .

. •

. ,.

".. ..

ipro.Ceccion

-..'

._._ .

•

assu_ptlon. is

.$oodn. amd factor, and de_nd, as

etc..

possible"_tb

keep the

analysis

-The. measured

•

whole

..,

•

markets.i" tha_

•

respect" manaseable.

.of _Pa vaiues .

overall

pic_u.re.ts

" + ,

_ange •

homogeneity.

cou_

tbe

• _

". •

£s, ._he-

be aomet_at

reuse

no.t-likelyChiC_,

_assumption.

Finslly,-"_iere:i_-a -.

, ,

O_ _s_u_rp_ion_. .."""

-......:

to the_e

Co_petiCios

i_.

_o.f...products,

be que_clon_d;

abodt

elasticities

We have

_ssu_Cions,

tried

subject

suppl._

cobe-as to

subsCitu-tion

•

. ..

Yhat

by _his

for

•

'"sreaciy."affected

be less.

among, industries

SO wtde,.however,-...thac /

generally

we allow

. :. -'.

.:this.

overstated-because;.off .

voulg

_n-. effective

in prod.notion.

o_r-EP1_. :e_u_es

•

-differences.

coefficient,

is cbe.

the need

real!silt _.

References

BsUtista,

Romeo R..,.John H..Pover and Associate8,... IndustrialPromoti© .PoliCies"ie..thePhilippiees,. Hsnilaz. Philippine Institute Developmut Studies,-.1979, let printinS; 198&, 2rid pr/nting.

for

M_u___uy,Celie P...,. "KstimaC£ng the.Shadow.-Price of Capital",...... Iuduetr_-.Promotion Pollcies"in_thePhillp_inu, . Manile.: • Phi_ipp/ne Institute £or.Developmen_t Studies, 1979, lst.pT.intt_; !98&, 2nd printin%.

Nedalla,

EtI£nda M,:, "Estieatin8 the Shadov Price of Labor",. . Industrial PronOtiou Policies in the Philipp_htes,. ManL1a: Philippine_Iust.i.tute for Development Studies, 1979. " let .printi-_8;. 1984, 2nd printinS.-

• ' andjohn H. Power,"Estt_atin8 Impl/c£t.Tatiffs and Nominal Rates o£..Protection,,-Industr_"Pr0motion • Polic!es.$n_the_Phil!pp.._in.e_, Man£1a:Philippine_Inetltute • Deve$opmenCStudies,1979, let prietiU$;-_1984, 2nd.printins,

for. "