The Impact of Protection on Developing Countries: a General Equilibrium Analysis

This paper presents the results of an experiment in using a general equilibrium model to investigate the implications of protectionism in a world with rigidities. It reflects two aspects of policy-making today. One is the strong resistance of broad groups of the population to reductions in per capita incomes. The other is the efforts of pressure groups to use protection (and other means) to manipulate the distribution of incomes in their favour. To the extent that they are successful, these efforts extract rents from the economy and reduce its efficiency, making it more difficult to satisfy the per capita income objectives of the rest of the population.