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The study determines the policy incentive in terms of protection and efficiency of production through comparative advantages in the rice sector by using policy analysis matrix (PAM) for the period of 2003 to 2005 nominal average on the basis of secondary data from different published and unpublished sources. From policy analysis matrix in-line with private/financial profit, social/economic profit and policy divergences/transfers various protection coefficients such as NPCO, NPCI, EPC and PC and competiveness coefficients such as DRC, SCB, SNRL and PNRL were derived to measure the level of protection and comparative advantage in the rice sector of Bangladesh.The results of the policy transfer and protection coefficients ( NPCO,NPCI, EPC and PCO criteria) shows that rice production in Bangladesh is subsidized for inputs (NPCI<1) and taxed for the product/output (NPCO<1).The net effect of output taxation and input subsidy resulted in a net taxation on value added (EPC<1) for policy goal of self sufficiency. On the efficiency ground, the estimated economic profitability criteria and competitiveness indicators (DRC, SCB, PNRL and SNRL) demonstrate that Bangladesh has comparative advantage in domestic rice production for import substitution and its opposite under export parity situation. Thus the results are consistent with the intuition of the simple Heckscher-Ohlin model because rice has a higher labor/land ration than other crops. The sensitivity analysis shows the sensitiveness of rice production competitiveness towards technological improvement, climate change and change in international and national price of input and output under import parity condition. Finally, based on the findings of the study some policy recommendations were made.