A Study of Protective Policies and Comparative Advantage in Handmade Carpet Production

Awareness of existence of advantage in various sectors of each country is a necessary guide to assess its presence degree in international markets. As now, our country is a supervisor member of WTO, it is necessary to identify different industries so that we can have our favorite advantage in the global trade. In this study through domestic resource cost index, we estimated the relative advantage in the production of hand- made silk 65 raj carpet which is known as the best carpet for production-export purposes in 3 provinces of Qom, Esfahan, and West Azarbaijan in 1385. On the other hand, regarding the fact that government policy in various sectors affects the relative advantage, it is necessary to compute the protection coefficient to investigate the protection volume in these sectors. Results indicated the existence of production relative advantage in these 3 provinces. Furthermore, nominal protection coefficient of output shows that in every 3 provinces, indirect subsidies were imposed on protection, but nominal protection coefficient of factors show that producers pay indirect taxes for using these factors. Finally, effective protection cost shows that the sum of government protection of production and government indirect policy on tradable factors is positive. Generally speaking, government policy protects output production process.