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Variable Specific Factors and the "X-Efficiency Cost" of Protection

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  • Vousden, Neil
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    Abstract

    This paper analyzes the effects of protection on X-efficiency using a general equilibrium Ricardo-Viner model with variable sector-specific effort. As in earlier models, it is found that protection only reduces effort if the income effect is sufficiently strong. It is also shown that, provided the correct compensated import demand curve is used, all welfare effects attributable to changes in effort are captured in the standard "triangle" measure of deadweight loss. Moreover, any protection-induced fall in effort will reduce the overall cost of protection, suggesting that policy-induced "X-inefficiency" may be beneficial. Copyright 1993 by Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Review of International Economics.

    Volume (Year): 1 (1993)
    Issue (Month): 3 (October)
    Pages: 234-42

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    Handle: RePEc:bla:reviec:v:1:y:1993:i:3:p:234-42

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576

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    Cited by:
    1. Chand, Satish & Sne, Kunal, 2002. "Trade Liberalization and Productivity Growth: Evidence from Indian Manufacturing," Review of Development Economics, Wiley Blackwell, vol. 6(1), pages 120-32, February.
    2. Satish Chand, 2004. "Sweet land or Sweat land: Two proposals for facilitating access to land and adjustment to eroding EU sugar preferences in Fiji," International and Development Economics Working Papers idec04-6, International and Development Economics.

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