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Effective Protection Redux

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Author Info

  • James Anderson

    ()
    (Boston College)

Abstract

This paper rehabilitates effective protection. In general equilibrium, the usual definition (the percentage change in value added per unit induced by the tariff structure) corresponds to no economically interesting magnitude. The effective rate of protection for sector j is defined here as the uniform tariff which is equivalent to the actual differentiated tariff structure in its effect on the rents to residual claimants in sector j. This definition applies to general as well as partial equilibrium economic structures, has obvious relevance for political economy models and seems to correspond to the motivation for the early effective protection literature. Like the earlier effective rate formula, the concept is operational using the widely available set of Computable General Equilibrium (CGE) models. An example is provided for the US economy. The numerical results for the old and new concepts are not significantly correlated.

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File URL: http://fmwww.bc.edu/EC-P/wp308.pdf
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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 308..

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Length: 33 pages
Date of creation: Sep 1995
Date of revision:
Publication status: published, Journal of International Economics, 1998, 44:21-44.
Handle: RePEc:boc:bocoec:308

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Keywords: effective protection; distance function;

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References

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  1. J Anderson & J.P. Neary, 1993. "Domestic Distortions and International Trade," CEP Discussion Papers dp0179, Centre for Economic Performance, LSE.
  2. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, April.
  3. W. M. Corden, 1966. "The Structure of a Tariff System and the Effective Protective Rate," Journal of Political Economy, University of Chicago Press, vol. 74, pages 221.
  4. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  5. Dixit, Avinash, 1985. "Tax policy in open economies," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 6, pages 313-374 Elsevier.
  6. Anderson, James & Naya, Seiji, 1969. "Substitution and Two Concepts of Effective Rate of Protection," American Economic Review, American Economic Association, vol. 59(4), pages 607-12, Part I Se.
  7. Jones, Ronald W., 1975. "Income distribution and effective protection in a multicommodity trade model," Journal of Economic Theory, Elsevier, vol. 11(1), pages 1-15, August.
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Cited by:
  1. Ronald Fischer, . "Trade liberalization in Latin America: The case of Chile," Documentos de Trabajo 190, Centro de Economía Aplicada, Universidad de Chile.
  2. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, EconWPA.

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