Comparative Advantage and Protection in Indonesia¹

¹ This paper has benefited from the outstanding computational assistance of Cezary Kapuscinski, from the author's discussions with George Fane and Santiago Levy, and from the comments of two referees. The author is responsible for all views expressed and any errors.

Abstract

The comparative advantage of Indonesia's traded goods producing sectors is examined in this paper. Comparative advantage is studied by computing the domestic resource costs of foreign exchange earned or saved in each of the 138 such sectors defined in the 1985 input-output tables for Indonesia. The paper also computes measures of effective rates of protection. It is found that these two types of measures are highly correlated across industries. The paper also shows that between 1975 and 1987 the distortionary effects of Indonesia's trade policies declined markedly. Nevertheless, Indonesia's most highly protected industries continue to be those in which its comparative advantage is least.

¹ This paper has benefited from the outstanding computational assistance of Cezary Kapuscinski, from the author's discussions with George Fane and Santiago Levy, and from the comments of two referees. The author is responsible for all views expressed and any errors.

Notes

¹ This paper has benefited from the outstanding computational assistance of Cezary Kapuscinski, from the author's discussions with George Fane and Santiago Levy, and from the comments of two referees. The author is responsible for all views expressed and any errors.