Title

Differential Tariffs, Negative Value-Added and the Theory of Effective Protection

Publication Type

Journal Article

Publication Date

3-1970

Abstract

This article examines the implications for effective protection(EP) theory of allowing variable factor proportions and general equilibrium repercussions. The first claim of EP theory, is that it provides a measure of the maximum proportionate increase in factor rewards permitted by a tariff structure, as compared to a free trade regime. EP rates predict only a particular direction of resource flows whereas general equilibrium analysis, with variable input coefficients, indicates that flows contrary to EP prediction are possible. Two examples are provided, first, where there is a uniform tariff on final goods; and second, where one final sector has a higher nominal tariff than the other and there is no tariff on material imports. EP rates depend not only on nominal tariffs but also on value-added.

Discipline

Economics

Research Areas

International Economics

Publication

American Economic Review

Volume

60

Issue

1

First Page

107

Last Page

116

ISSN

0002-8282

Publisher

American Economic Association

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