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Effective Protection and Resource Allocation

In: International Trade and Finance

Author

Listed:
  • Jaraslav Vanek
  • Trent J. Bertrand

    (Cornell University)

Abstract

One of the main topics on the agenda of international trade theorists in recent years has been the problem of effective protection. The concept of the effective rate of protection — the percentage distortion in value added attributable to tariffs on both the final and intermediate products in a production activity — is designed to indicate the degree of protection afforded different activities. As such, it has been used in studying the effect of tariff systems on resource allocation and in designing tariff systems for the achievement of policy goals such as encouraging certain industrial activities in less developed countries. In this paper, we evaluate the usefulness of the concept of effective protection for these purposes. In so doing, this paper establishes certain new results concerning the effect of the tariff system on resource allocation and illustrates a basic result concerning optimal tariff interference.

Suggested Citation

  • Jaraslav Vanek & Trent J. Bertrand, 1973. "Effective Protection and Resource Allocation," Palgrave Macmillan Books, in: Willy Sellekaerts (ed.), International Trade and Finance, chapter 12, pages 263-276, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-01269-5_13
    DOI: 10.1007/978-1-349-01269-5_13
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