General Equilibrium Analysis of Negative Value‐added

A simple two‐sector general equilibrium model is developed to show how the phenomenon of negative value‐added occurs in the protected sector, when the intermediate input is an exportable of the country. Previously, it has been shown in a partial analysis that the production loss of negative value‐added comprises two elements – the foreign exchange loss and the domestic resource loss. These losses are geo‐metrically identified in the general equilibrium model. This analysis departs from earlier ones, however, in that the intermediate input is treated as an exportable good rather than an importable one.