Effective Protection Redux
This paper rehabilitates effective protection. The usual definition of the effective rate of protection is the percentage change in value added per unit induced by the tariff structure. The problem is that in general equilibrium this measure 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 effects 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.
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- Grossman, Gene & Helpman, Elhanan, 1993.
"Protection for Sale,"
CEPR Discussion Papers
827, C.E.P.R. Discussion Papers.
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- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
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"Domestic distortions and international trade,"
Policy Research Working Paper Series
1163, The World Bank.
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- repec:cup:cbooks:9780521296762 is not listed on IDEAS
- 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.
- 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.
- J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar, volume 0, number 575.
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