Measuring the TFP Costs of Barriers to Trade

We perform development decompositions measuring the effect of trade restrictions on TFP and labor productivity. An economy with two tradable and non-storable intermediate goods, used in the production of a non-tradable final good, is assumed. The solution of the static trade and factor allocation problem generates a mapping between factor endowments and final output, which is then used in our exercises. For middle income economies with high tariff rates, the effects of trade restrictions are significant; in some cases, enough to attribute to protectionism one third of their TFP disadvantage. The impact on GDP per worker is also relevant