Alternative Approaches to Measuring the Cost of Protection

Economists measure the economy-wide cost of protection in terms of static efficiency, growth rates and firm- or industry-level productivity. The earlier literature was devoted almost exclusively to the measurement of static welfare effects. But the recent proliferation of cross-country regressions has led some economists to focus on the effects of protection on growth rates. Equally, the increased interest in firm- and industry-level regressions has given rise to studies aimed at measuring the effect of protection on firm or industry productivity. A final, albeit less formal, strand of the literature focuses on in- depth case studies of specific countries or sectors. The purpose of this paper is to offer a unified treatment of the literature on the cost of protection with special attention paid to the measurement of these effects.