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World Development Report 1984

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over time. The main focus of industrial countries in the real incomes of certain groups, they also prethe<br />

years ahead should be on developing ways to vent the adjustment to a country's emerging and<br />

reduce budget deficits. changing comparative advantage, which alone can<br />

ensure growing real incomes of all groups in the<br />

Microeconomic flexibility economy. The maintenance of an open trading system<br />

is, therefore, an important means of reducing<br />

In several areas of their economies-subsidies to microeconomic distortions. For example, protecobsolescent<br />

firms and industries, wage and other tion is costly to the country using it. The cost of<br />

policies affecting labor costs-industrial countries "saving" jobs is higher consumer prices and ineffineed<br />

to introduce greater flexibility in the way they ciencies in production (see Box 3.1), as well as loss<br />

accept and promote economic change. Though of potential jobs in export industries, particularly if<br />

protectionist policies might temporarily maintain other countries increase protection as a response.<br />

40<br />

Box 3.1 Costs of protection in textiles and clothing<br />

1,l-r. .,rd dtir &i- , .. ':- 3ob, n ina I ii t -4., Tin . iTr.T tr $1 for every 7 cents gained by workers<br />

Z.- rrn.rr- -t ind t,rtri;e ba hr., o-rd t ri ri aj mubh -ir r. h-rr II d-rE pr; ri'i J<br />

r'rr: *.i i-.j r-; . r-r,dnt r - ain'i bin t- *r' Th- pr.-ril r Au'- --- . Tb.: hri 1 um studies estimated the<br />

jt% ...- - i uir I. p.nr p! ri .,n,. 1. .. 1 tn .' h % r e.h -..rler i., p.Frnl.i - costs (i .-ii Th I'll,: on the clothing<br />

.I -lr-' Th, ni. u-r -F. rint it lii½. r- .rl-. I-r. hr iU s.r her' . tr.iinal t.. '., . trade, which were much higher than<br />

.1'iIe 5l :andi -. irhnrr and h-. F *:- n .111 el--rt :_ ir-mm fT T ir irLt - it.. of tariffs alone. The cost per job<br />

Irrp It-I r!i nit u r h - !.lIIi rt- Ilii- i-ls ti- r b l. tl-; tE t p.rnlintli controls was esti-<br />

-\ranecnrn. in -i i, .u I-a1 I . rhir.t- ran.d ,...i r, J r- - C$390,000 in the late 1970s.<br />

ih.ar t,ich t'rr3rrni, .rE und.-'raitl P.-r pr-i-at h . t I. thrc--qu,aricr-j . di§- Because the individual worker lost only<br />

dr -i. lili ander- n d ' d .' *:rk-r. ir. r i, ti .hi-; riduTr. * 14 1i0) (before welfare benefits), the<br />

i.-;i i- .urlt ind lrhin .ii.l zihd ll T 1. nd n i L Ilr-., erL untnipi.-C t r nrl e- n. . -i-ie , was about C$375$000.<br />

ani'41ls !II ptr b not ' thf i'nT. L -tII Iiirci zr-ni Ir,cil in n *v v. .O. 1-d zr. .3 Thi" -i:ac n eeded to save each wo rker<br />

p r - . .: -Lin'-, T.-, i(i.il iC...nn bIll. i -mr1n., .. ti-I- i<br />

ill 111 ;ratio of over 70 tol. For every<br />

t.:r :r. .. -r.n ail -i-p .0 Ihi. ad1. r T-i. hib.i pi:* m ,i r rl i , u -1r .,i--'di-rci one and a half cents by which the worker<br />

I ir * p I.-i 1. r . r ni. ila:.,uf UIli rt tr. Ir,.nr. i high -- ! C 4 'liii icr rh-i.: :. rr;; would be better off, one Canadian dollar<br />

*hb: rIb-i k..t- .rr, n hr h,.r. .r-enrtr . rnn n r, -ur- , t- iI- ., would be wasted.<br />

-ntur. r i F in rh th ri. rt..tr t-nr-lh h i, C I-. .-. , r .!.i n -'. K- cib..Thr Develnpinz countries also use various<br />

.;n i-r. --<br />

n-; rh. InJ li d l : Ihhil L-i t... ib tsslt.mc. 1-.1i-rt t'cr.r l' Th, h.gh--s t.irmirT l, ,n i4olhilai.ar. .:restrictions(along<br />

rI r t-r -r; c., -i n I' lirge ;ppi- I. - * .Lird in .iih,r I Ilit 1-. . m '-r.; with foreign exchange controls and<br />

- m ati I, r rh-r .. I. h<br />

i , r .ia.. n--it. I.r I I). broader measures such as industrial<br />

ii.'- -- Ih rA Si t d' 7,in 1,4 *-......urilrie-' .. i-*Td tr Olti e as - k.:-i ,.- I- ie .1 .cr r.c -. Ird r. -* irr,nt incentives) to<br />

:i,h, 1.i r, I snI.4 r,;n,1 ' l.,.nu- rl".- , 1 ir.- r I, r -. lord r I lIh t LI. rir, rT,,nrr t p,, -. Irridol'iJL t.rr- CC n,r.iil, such<br />

lm iilr,_ I t Il. il fi r-31i-l nl: -r-. t ir-.i t t-h, c . r .r- ,-. ,r; sIt r- - . ., >. r Ii'iit' h:a . -r-i production for<br />

rli-c uS ut i-anti: i . i t. It.. nel - -- i ver production foT export<br />

Mob I';-I.:- krn.-- n ar, ti),, n pr d . -irrpl. Ba,.vd narlket and r.jfa. irir over agri-<br />

.r: I' -r rt, ti iiI _. ,fi lr .r -.iri r , n : 1 0 arIII i, n? I tb.r ( r. Ir .:1 I h, ir n .rd , culture. FT I- rk-n and other measures<br />

b, n;i- . tl - r * if F. L -nted I '* luI.- t- ; a -t- *n n . .l*niai-l117. L ; 42'- oilii,.i I T .il,.Trl..I,fl.i Ir.r. .Trr.-wr,- .pro-<br />

- i. -n TbIr dir T-i rr lt ir,.lr r.:l-. i 14 . ' r.,. i 1. r.*,r.c .<br />

duction, - .in;lT-l.ii and trade; these<br />

hi Ii . tt-reih. ir T..:..I,d . ni. ihe lrm ld .t.'. *d1.,itrnn Il; p1.-uCI *.-i no ni r : r.- i.s ,I, .. i, -ri.e<br />

..T.lCgrowth.Studiesof<br />

-l'' m r ! .5i-ifl-.. m - r..,! mi 1--I lol i dclt!.-T-l-Tnu fh_ nr-r- nT, .'lu- -I 11'. I- - l -.. .h protection, such as<br />

T- -.- . I l e, r I-r, I,. Ic r<br />

' Ii- In rhi -lIt tli: TIl,et rmni.1-lri<br />

I,<br />

..<br />

Iitl-u i<br />

li,-. r<br />

- -l .- I tid hr.<br />

'hitE irni Ii.<br />

t ,r, i-I' t.itr<br />

TalliT r,<br />

I l- TI i. lit<br />

n . r i-n .<br />

lfriv . .s SUi;c and Canada,<br />

I -. ne in developing counr-ltind.ri<br />

Ir-nCr- -r. , tI , rind .iro rd ,-...i Tr. i t l r.- 1t*- Ttn. But j,nO--fC n -d-T-.p- countries,<br />

_ Ir. 'i, ii .:. Tit ,1 h.- d.d (i. .T p.rni.mn,ntflT F ri-u . fl, r-I- i 5 I' .. :-ni more uniform and<br />

i rl;.,1r<br />

I, - .. -r . i T 11) -T ri M -I,I . , ci --- e o..,ld tr ;1- -1n ri' I ii - .. ..- 0. ut',i patterns of incentives have perm<br />

I-p-ri-c : it. n lb.;,,<br />

I,d.il .' k.r , t . i.,i tic-J r in ir:rms of economic<br />

Ia-.br. 1.-b I hrh fra 31': t'r.- lii i ie n.j.-.<br />

ni. a n .-. un,n,i l-ir ri-rr TI _--ol i-c i-i'l_ a 15Th.. r.. 14 I-, I I-t St-Ti-. -,- - - ilh t rrn.iI<br />

cci, .1-.. at... ., t1U .- hii -- .i T--..-....iii. i- i A-iptircari iSTIT fl,. -. 2k-<br />

.t .- 1...i: I -cr1 , I . ,rI 1 hs .- ard I! r I- i... r r- h, r.-T t-, '-tI' I

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