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Effective Protection Redux

  • James E. Anderson

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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File URL: http://www.nber.org/papers/w5854.pdf
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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
Date of revision:
Publication status: published as Journal of International Economics, Vol. 44 (1998): 21-44.
Handle: RePEc:nbr:nberwo:5854
Note: ITI
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  1. 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 139-57, February.
  2. repec:cup:cbooks:9780521296762 is not listed on IDEAS
  3. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  4. J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar, volume 0, number 575, December.
  5. 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.
  6. 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.
  7. 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.
  8. 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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