Open AccessOn Two Formulae for Calculating the Effective Rate of Protection (Notes & Comments)
Author(s) -
Sobia Naseem,
B. S. M. Berendsen
Publication year - 1973
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v12i2pp.189-193
Subject(s) - value (mathematics) , economics , meaning (existential) , confusion , ambiguity , mathematical economics , mathematics , unit (ring theory) , econometrics , statistics , philosophy , psychology , linguistics , mathematics education , epistemology , psychoanalysis
In the literature on effective tariff protection, two formulaehave been used, more or less equivalently. One defines effectiveprotection as the percentage difference , between value added atdomestic prices and value added at world prices. The other defines it asthe percentage difference in value added per unit of output at the twosets of prices. The first definition has been used by Balassa (1965)Bhagwati and Desai (1970) and Lewis and Guisinger (1968), whereas thesecond definition seems to have been used by Basevi (1966), Corden(1966) and Leith (1967 and 1968). There is some ambiguity in the worksof the last three authors as to the meaning of value added per unit ofoutput at domestic prices. Part of the confusion arises because none ofthese authors explicitly defines this concept. Leith (1967) implicitlydefines this as value added at domestic prices divided by the value ofoutput at domestic prices [5, foot-note 14, p, 60, equation (A-5 andA-6) p.70]. Basevi (1966) implicitly used this definition at one place[2, p. 140] but at another he implicitly defines value added per unit ofoutput at domestic prices as value added at domestic prices divided bythe value of output at world prices. [2,p. 148]. The last definitionalso seems to have been used by Corden (1966).