In economics, the effective rate of protection (ERP) is a measure of the total effect of the entire tariff structure on the value added per unit of output in each industry, when both intermediate and final goods are imported.
This statistic is used by economists to measure the real amount of protection afforded to a particular industry by import duties, tariffs or other trade restrictions.
[2] The idea was developed and applied to policy analysis by Max Corden.
The domestic shoe maker is afforded a 60% effective rate of protection per dollar of value added.
, where: An alternative that yields an identical answer is that the effective rate of protection equals
In this context, it does not matter whether the final product or the inputs used to make it were actually imported or not.