Empirical Problems of Effective Rates of Protection: An Evaluation of Past Experience

During the last 10 years a number of articles have been published on the concept of effective protection. Most of them were concerned with theoretical aspects of effective rates of protection (ERPs) in the usual neoclassical framework. Therefore, practitioners had little help from this literature when they wanted to use the basic ERP formula on a more complex world and with limited data supply. The insufficient discussion on -the empirical problems might be the main reason, explaining why the results of actual calculations of ERPs are hardly comparable. Anyway, in nearly every empirical investigation that I know of, a different formula has been used [see 1,2,3,5,6,12,14,16,17 and 23]. Because the concept of effective protection has in the meantime been established as a major tool for analyzing the resource allocation of primary factors between industries and the resource costs of producing one unit of domestic currency if output and inputs are valued at free trade prices it would be worth-while to discuss the major empirical problems of ERPs in order to bring about comparability between future results.