Decision Rules for Effective Protection in Less Developed Economies.

It is the purpose of this article is to show that the concept of effective rate of protection is useful in defining protection policies given the constraints under which policy is often formulated in less developed economies. It studies the appropriate structure of protection when it is desired that a given amount of value-added he generated in a high priority sector of the economy. Arguments for giving general preferences to industrial activity, for instance, are often based on alleged dynamic affects on technology, the quality of the labor input, and the quality of entrepreneurship. Whether or not it is certain that these types of social benefits are specific to industry in general or certain types of industry in particular, they clearly are felt to be by policy makers in less developed countries. This paper is aimed at developing rational guidelines to policies based on these considerations. The problem considered in this article is to maximize the consumption possibilities open to the domestic economy subject to the constraint that a certain amount of value-added is generated in the industrial sector.