Advanced Search
MyIDEAS: Login to save this paper or follow this series

Rules of origin and uncertain cost of compliance

Contents:

Author Info

  • Mizuno, Tomomichi
  • Takauchi, Kazuhiro

Abstract

To consider the role of uncertain production cost resulting from complying with rules of origin (ROO), we formulate a Cournot oligopoly model of a free trade area (FTA). If exporters do not comply with ROO, they must pay an external tariff, and if they comply, they enjoy zero tariff but suffer an uncertain production cost. Because compliers must source a certain ratio of the inputs from within the area, they face input-price fluctuations in that area; this yields an uncertain production cost for compliers. This uncertain cost provides a benefit to compliers owing to its variance. Therefore, for an intermediate external tariff, strategic substitution emerges in exporters' choice. We show that the coexistence of compliers and non-compliers is seen among symmetric exporters. We also discuss the endogenous rate of ROO-compliers in the coexisting equilibrium of compliers and non-compliers. We show that if the variance of the uncertain production cost is small, the rate of ROO-compliers in the coexisting equilibrium increases with the number of total exporters inside the FTA.

Download Info

If 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.
File URL: http://mpra.ub.uni-muenchen.de/44431/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 44431.

as in new window
Length:
Date of creation: 17 Feb 2013
Date of revision:
Handle: RePEc:pra:mprapa:44431

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Rules of origin; Compliance; Uncertain production cost; Oligopoly;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Higashida, Keisaku & Jinji, Naoto, 2005. "Strategic Use of Recycled Content Standards under International Duopoly," Discussion Papers, Graduate School of Economics, Hitotsubashi University 2004-12, Graduate School of Economics, Hitotsubashi University.
  2. Arvind Panagariya & Rupa Dutta Gupta, 2003. "Free Trade Areas and Rules of Origin: Economics and Politics," International Trade, EconWPA 0308006, EconWPA.
  3. José Anson & Olivier Cadot & Antoni Estevadeordal & Jaime De Melo & Akiko Suwa-Eisenmann & Bolormaa Tumurchudur, 2005. "Rules of origin in North-South preferential trading arrangements with an application to NAFTA," Working Papers, Institut National de la Recherche Agronomique, France 156782, Institut National de la Recherche Agronomique, France.
  4. Juan RosellOn, 2001. "The economics of rules of origin," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(4), pages 397-425.
  5. Rod Falvey & Geoff Reed, 2002. "Rules of Origin as Commercial Policy Instruments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 393-408, May.
  6. Creane, Anthony & Miyagiwa, Kaz, 2009. "Forgoing invention to deter entry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(5), pages 632-638, September.
  7. Rod Falvey & Geoff Reed, 1998. "Economic effects of rules of origin," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 134(2), pages 209-229, June.
  8. Demidova, Svetlana & Krishna, Kala, 2008. "Firm heterogeneity and firm behavior with conditional policies," Economics Letters, Elsevier, Elsevier, vol. 98(2), pages 122-128, February.
  9. Hayakawa, Kazunobu & Hiratsuka, Daisuke & Shiino, Kohei & Sukegawa, Seiya, 2009. "Who Uses FTAs?," IDE Discussion Papers, Institute of Developing Economies, Japan External Trade Organization(JETRO) 207, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  10. Jota Ishikawa & Hiroshi Mukunoki & Yoshihiro Mizoguchi, 2007. "Economic Integration And Rules Of Origin Under International Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 185-210, 02.
  11. Anthony Creane & Kaz Miyagiwa, 2005. "Information and Disclosure in Strategic Trade Policy," Emory Economics, Department of Economics, Emory University (Atlanta) 0530, Department of Economics, Emory University (Atlanta).
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Kazuhiro Takauchi, 2014. "Rules of Origin and Strategic Choice of Compliance," Journal of Industry, Competition and Trade, Springer, Springer, vol. 14(2), pages 287-302, June.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:44431. See general 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: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.