Market Access and Welfare Effects of Free Trade Areas without Rules of Origin
AbstractThe market access and welfare effects of Free Trade Areas (FTAs) without Rules of Origin (ROOs) are studied. We consider the final and intermediate goods markets and their interlinkage. The FTA weakly reduces all tariffs and prices within the FTA. This raises quantity demanded and reduces quantity supplied for both the final and intermediate goods, thereby raising imports. This is the classic trade creation effect and is welfare improving. We identify two additional effects which work in the opposite direction and identify conditions under which these welfare reducing, import reducing effects dominate.
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Bibliographic InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 96-03.
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Other versions of this item:
- Ju, J. & Krishna, K., 1996. "market Access and Welfare Effects of Free Trade Areas without Rules of origin," Papers 2-96-1, Pennsylvania State - Department of Economics.
- Jiandong Ju & Kala Krishna, 1996. "Market Access and Welfare Effects of Free Trade Areas without Rules of Origin," NBER Working Papers 5480, National Bureau of Economic Research, Inc.
- Ju, J. & Krishna, K., 1995. "Market Access and Welfare Effects of Free Trade Areas Without Rules of Origin," Papers 11-95-3a, Pennsylvania State - Department of Economics.
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