Firm Behavior and Market Access in a Free Trade Area with Rules of Origin
AbstractWe develop a model to study the behavior of firms in a Free Trade Area with Rules of Origin and the consequences of this behavior on the market equilibrium and outcome. We show that firms will choose to specialize, and that an FTA with strict ROOs on the intermediate good raises imports and hence improves market access in the final good market reduces imports and hence harms market access in the intermediate good market. More restrictive ROOs on the final good first raise and then lower imports of the final good lower than raise imports of the intermediate good. Their turning point is common so that imports of the final good are maximized and imports of the intermediate good are minimized at a common level of restrictiveness of the rules of origin. We show that our model can be reinterpreted to show that more restrictive ROOs on the final good first improves and then harms the fortunes of labor, and to cast light on a particular policy to improve market access. Other problems with a similar structure could also be analyzed using our techniques; we expect similar results.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6857.
Date of creation: Dec 1998
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Jiandong Ju & Kala Krishna, 2005. "Firm behaviour and market access in a Free Trade Area with rules of origin," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 290-308, February.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Jiandong Ju & Kala Krishna, . "Market Access and Welfare Effects of Free Trade Areas without Rules of Origin," EPRU Working Paper Series 96-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- 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.
- 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.
- Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
- Krueger, Anne O., 1997.
"Free trade agreements versus customs unions,"
Journal of Development Economics,
Elsevier, vol. 54(1), pages 169-187, October.
- Kala Krishna & Anne Krueger, 1995. "Implementing Free Trade Areas: Rules of Origin and Hidden Protection," NBER Working Papers 4983, National Bureau of Economic Research, Inc.
- Pravin Krishna, .
"Regionalism and Multilaterialism: A Political Economy Approach,"
96-5, Brown University, Department of Economics.
- Pravin Krishna, 1998. "Regionalism And Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 227-250, February.
- Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, vol. 82(3), pages 615-25, June.
- repec:fth:coluec:9596-04 is not listed on IDEAS
- J Anderson & J.P. Neary, 1994.
"Measuring the Restrictiveness of Trade Policy,"
CEP Discussion Papers
dp0186, Centre for Economic Performance, LSE.
- Bagwell,K. & Staiger,R.W., 1998.
"The simple economics of labor standards and the Gatt,"
9, Wisconsin Madison - Social Systems.
- Kyle Bagwell & Robert W. Staiger, 1998. "The Simple Economics of Labor Standards and the GATT," NBER Working Papers 6604, National Bureau of Economic Research, Inc.
- Richardson, Martin, 1995. "Tariff revenue competition in a free trade area," European Economic Review, Elsevier, vol. 39(7), pages 1429-1437, August.
- Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc.
- Lopez, Ramon & Rodrik, Dani, 1989.
"Trade restrictions with imported intermediate inputs : when does the trade balance improve?,"
Policy Research Working Paper Series
174, The World Bank.
- Lopez, Ramon E. & Rodrik, Dani, 1990. "Trade restrictions with imported intermediate inputs : When does the trade balance improve?," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 329-338, November.
- Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
- Paul Krugman, 1989. "Is Bilateralism Bad?," NBER Working Papers 2972, National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.