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Effective Protection Redux

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  • James E. Anderson

Abstract

This paper rehabilitates the concept of effective rate of protection for use in political economy. The usual definition corresponds to no economically interesting magnitude in general equilibrium. The effective rate of protection for a sector is redefined here as the uniform tariff which is equivalent to the actual differentiated tariff structure in its effect on rents to residual claimants in the sector. The new ERP permits a political economic ranking of across sectors, since higher uniform tariff equivalents imply higher losses of welfare sacrificed to interest groups. The new ERP converges to the old ERP under a very special set of assumption, and elsewhere generalizes the ERP concept to any economic structure in which residual claims are defined. Numerical results for the new ERP are presented for the US economy in 1982 using the USDA/ERS computable general equilibrium model. The calculated old and new ERP's are not significantly correlated.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5854.

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Date of creation: Dec 1996
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Handle: RePEc:nbr:nberwo:5854

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  1. Anderson, James E. & Neary, J. Peter, 1993. "Domestic distortions and international trade," Policy Research Working Paper Series 1163, The World Bank.
  2. 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.
  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, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  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. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, November.
  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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