Incidence of protection: the case of Korea

The purpose of this article is to obtain an economy-wide measure of the incidence of protection, called ω, in a model economy, Korea. This parameter measures the extent to which the protection of import-competing activities is shifted onto the producers of exportables. The empirical results yield an implication to the Korean trade policies, supporting the view that even though the Korean government had comprehensive and active commercial policies, it has adopted a policy package aiming toward free trade in the second-best sense. The Korean export sector was compensated for any harmful effects of the import-protective policy by direct and informal export incentives that the government provided. The article is organized as follows. Section II, gives a brief history of Korean trade policies. Section III, before carrying out the empirical analysis, first compares the measures of commercial policy with others that are available. It then estimates the Korean incidence parameter in Section IV. -from Author