percentage effect of the entire tariff structure on the value added per unit of output in each industry. The Effective Rate of Protection
Tariff Structure Value Added
Tariff structure Value added is the refers to the difference between relationship among the selling price tariffs in related and the cost of industries. intermediate goods. V = PA - PSa The Effective Rate of Protection
ERP = ( V’- V ) / V
ERP = Effective Rate of Protection
V’ = Value Added with tariff
V = Value added with free trade
The Effective Rate of Protection
ERP = (tf – ati) / (1 – a)
Where tf is the nominal tariff on the
imported finished good, a is the value of imported inputs as a share of the value of the final good under free trade, and ti is the tariff on imported inputs used by the domestic producers.