Lobbying incentives and the pattern of protection in rich and poor countries

Abstract

The simplest model necessary to simulate the impacts of trade protection policy is a computable general equilibrium model of production and consumption with three sectors (two producing tradables and one producing nontradables) and various forms of capital plus labor and intermediate inputs. Detals of such a model are presented by adding a nontradables sector to the standard two-sector specific-capital model of production with intermediate inputs. Representative parameter values for a typical poor agrarian economy and a typical rich industrial economy are used to calculate the distributional effects of tade policies in those two archetypical economies. Results reveal a distortion of the agricultural/industrial product price ratio has vastly different effects on real incomes of different groups - particularly farmers and industrial capitalists - in rich as compared with poor countries. The article concludes with a brief discussion of some implications for future policy reforms. -from Author