Effective Protection Redux / James E. Anderson.

By:

Anderson, James E

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5854.Publication details: Cambridge, Mass. National Bureau of Economic Research 1996.Description: 1 online resource: illustrations (black and white)Subject(s):

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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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Previous	nber w5851 Optimal Government Spending and Taxation in Endgenous Growth Models /	nber w5852 Are Some Mutual Funds Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance /	nber w5853 Product Standards Coalitions in a Market Without Borders /	nber w5854 Effective Protection Redux /	nber w5855 The Timing of Work Time Over Time /	nber w5856 The Invisible Hand and the Grabbing Hand /	nber w5857 Consumption and Portfolio Decisions When Expected Returns are Time Varying /	Next

December 1996.

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.