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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- Anderson, James E & Bannister, Geoffrey J & Neary, J Peter, 1995.
"Domestic Distortions and International Trade,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 139-157, February.
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- 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.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, August.
- J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar Publishing, volume 0, number 575. Full references (including those not matched with items on IDEAS)
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