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Tariff Protection, Import Substitution, and Investment Efficiency: A Comment

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  • GUSTAV PAPANEK

    (Harvard University)

Abstract

The Soligo and Stern article [6] renders a major service, in attempting a quantitative measure of the efficiency of the allocation of investment to different industries. By substracting the net subsidy provided to domestic industry (through tariff protection) from the value added in each industry, Soligo and Stern estimate the social contribution to the economy (or "social value added") of investment in a particular industry. They reach the conclusion that "the pattern of investment has been wastefully biased towards consumer goods industries." If correct, this conclusion should have important consequences for tariff policy and investment planning. However, a number of questions can be raised about the methodology of their study. A different set of assumptions and methods might have led to different conclusions. The major adjustments which could be made are

Suggested Citation

  • Gustav Papanek, 1966. "Tariff Protection, Import Substitution, and Investment Efficiency: A Comment," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 6(1), pages 105-109.
    • Handle: RePEc:pid:journl:v:6:y:1966:i:1:p:105-109
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