The political economy of manufacturing protection in LDCs: An Indonesian case study

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Abstract
There are significant inter‐industry variations in protection in all but the most open of economies. This invites the obvious question, why? Are these variations simply random in nature, or are they systematic, and therefore amenable to explanation? Most of the literature on this subject pertains to industrialized economies. Few studies have been undertaken of developing countries, where political institutions are less developed, policy‐making processes often less transparent, protection generally higher and more dispersed and the data base usually poorer. In this paper, we examine these issues with reference to Indonesia, a large, rapidly industrializing economy with high (albeit decreasing) levels of manufacturing protection. We find that the standard theory purporting to explain inter‐industry variations in protection performs quite well in some cases, although a substantial unexplained residual exists. We give examples of how the theory developed for industrialized economies might be modified for developing economies.

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