Comparative Advantage and Protection in Indonesia 1
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.
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