The Sectoral Incidence of Protection and Zimbabwean Agriculture

This article applies the literature on ‘incidence analysis’ to the case of Zimbabwe, the main hypothesis being that industrial protection indirectly taxes agricultural exports by increasing the price of non‐tradeables. The extent to which industrial protection increases the price of non‐tradeables is measured by Sjaastad's incidence parameter. The study shows that there exists a generally high level of incidence and finds major differences in ‘true protection’ across categories of exportables and individual agricultural export commodities. The calculated price effects of industrial protection indicate substantial indirect disincentives to the production of agricultural exportables. On average, these are more than offset by direct subsidies in the case of beef. For other agricultural export commodities, indirect taxes either overcompensate direct subsidies or exacerbate the negative direct protection resulting in extremely high true taxation.