Domestic Resource Cost

Domestic Resource Cost

This paper resolves several points about proper use of the domestic resource cost (DRC) concept. It explores its relationship to the effective rate of protection, resolves the conflict between differing views of the DRC,. generalizes it, and argues that the DRC depends on the assumptions made about the hypothetical Policy intervention and adjustment mechanisms, so these should always be specified along with any DRC calculation. Finally, DRCs are argued to be only some of many potentially useful cost/benefit ratios that a general equilibrium model will generate, and a plea is made for more frequent use of such models in cost/benefit analysis.