Shilpi, Forhad J
Estimating the level of protection: The implications of seasonal price fluctuations
Teil von
  • World development, 1996, Vol.24 (5), p.929-937
Ort / Verlag
OXFORD: Elsevier Ltd
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ScienceDirect Journals (5 years ago - present)
The Nominal Protection Coefficients (NPCs), Effective Protection Coefficients (EPCs), and Producers Subsidy Equivalents (PSEs) are usually estimated from annual prices which are the unweighted average of seasonal prices. In the presence of seasonal fluctuations in prices, the NPCs, EPCs, and PSEs, estimated from annual data, can seriously over/underestimate the actual protection received by the producers and consumers. The bias results from the fact that price and quantity traded normally relate negatively, and unweighted average price consistently overestimates the trade-weighted average price. The bias in the NPC estimates is demonstrated both theoretically and empirically. In most cases, quantity traded at each price is not known, and the paper suggests empirical methods for estimating the trade weights.

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