Measuring market distortion: International comparisons, policy and competitiveness

Document Type

Article

Publication Date

2-20-2000

Abstract

This paper develops a framework to simultaneously estimate production possibility frontiers and measure distortions in factor and product markets. The econometric results, based on a panel of 61 countries over the period 1970 through 1985, reveal very little distortion in factor markets but considerable distortion in product markets. In addition, the distortions tend to vary with the cyclical behaviour of economic activity. Further, the results suggest that in order to improve efficiency, commercial policy should aim at reducing product-market distortions rather than factor-market ones.

Publication Title

Applied Economics

First Page Number

253

Last Page Number

264

DOI

10.1080/000368400322688

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