Statistical significance of indicators of efficiency and incentives: Examples from west african agriculture

Indicators of efficiency and incentives derived from trade theory, such as the domestic resource cost coefficient (DRC) and effective protection (EP), are generally presented as simple means. Analysis of their distributions, using farm data on millet and sorghum production from West Africa, shows them to be highly variable and, in some cases, to be significantly skewed. The analysis also shows the indicators to be highly elastic to changes in such parameters as input and output prices. If this variability is not considered when making inferences from such data, policy recommendations can be seriously misleading because they are based on different farming populations. © 1985 American Agricultural Economics Association.