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On Two Formulae for Calculating the Effective Rate of Protection

Author

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  • S.M. NASEEM

    (Pakistan Institute of Development Economics)

  • B.S.M. BERENDSEN

    (University of Islamabad)

Abstract

In the literature on effective tariff protection, two formulae have been used, more or less equivalently. One defines effective protection as the percentage difference, between value added at domestic prices and value added at world prices. The other defines it as the percentage difference in value added per unit of output at the two sets of prices. The first definition has been used by Balassa (1965) Bhagwati and Desai (1970) and Lewis and Guisinger (1968), whereas the second definition seems to have been used by Basevi (1966), Corden (1966) and Leith (1967 and 1968). There is some ambiguity in the works of the last three authors as to the meaning of value added per unit of output at domestic prices. Part of the confusion arises because none of these authors explicitly defines this concept. Leith (1967) implicitly defines this as value added at domestic prices divided by the value of output at domestic prices [5, foot-note 14, p, 60, equation (A-5 and A-6) p.70].

Suggested Citation

  • S.M. Naseem & B.S.M. Berendsen, 1973. "On Two Formulae for Calculating the Effective Rate of Protection," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 12(2), pages 189-193.
    • Handle: RePEc:pid:journl:v:12:y:1973:i:2:p:189-193
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