We can see, from Table A1, that the PAM provides a visually appealing way of capturing and
presenting the data on divergences and the profits, which can be labelled as follows:
|
Private Profits: |
D = (A - B - C) |
|
Social Profits: |
H = (E - F - G) |
|
Output Transfers: |
I = A - E |
|
Input Transfers: |
J = B - F |
|
Factor Transfers: |
K = C - G |
|
Net Transfers: |
L = D - H; or L = I - J - K |
The measures of policy effects, competitiveness and comparative advantage can be easily calculated
from the PAM as follows:
|
Nominal Coefficient Protection (NPC) |
= A/E = (A-B)/(E-F) = (L/A) = D = (A - B - C) |
|
Social Profits |
= H = (E - F - G) |
|
Domestic Resource Cost Ratio (DRC) |
= G/(E-F) |
The major limitation of the indicators (NPC, EPC, PSE, DRC) and the PAM is that they typically use
fixed input-output coefficients. As a result, the indicators or the PAM cannot indicate producer or
consumer responses to policy changes that reduce distortion.
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