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Firm heterogeneity, Rules of Origin and Rules of Cumulation

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  • Pamela Bombarda

    () (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)

  • Elisa Gamberoni

    (Elisa Gamberoni - World Bank)

Abstract

This paper sheds light on the restrictive nature of rules of origin (ROO) and on the role of diagonal cumulation in mitigating the protectionist content of ROO. Empirical evidence suggests that diagonal cumulation has beneficial effects on trade - particularly among spoke countries. We show that these patterns can be reconciled with a theoretical setting where heterogeneous firms buy intermediate inputs from domestic and foreign sources. The model finds that switching from bilateral to diagonal cumulation relaxes the restrictiveness of the ROO and leads the least productive exporters to stop exporting.

Suggested Citation

  • Pamela Bombarda & Elisa Gamberoni, 2013. "Firm heterogeneity, Rules of Origin and Rules of Cumulation," Post-Print hal-00874949, HAL.
  • Handle: RePEc:hal:journl:hal-00874949
    DOI: 10.1111/j.1468-2354.2012.00734.x
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00874949
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    References listed on IDEAS

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    1. 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," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 501-517, August.
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    11. Patricia Augier & Michael Gasiorek & Charles Lai-Tong, 2007. "Multilateralising Regionalism: Relaxing the Rules of Origin Or Can Those Pecs Be Flexed?," CARIS Working Papers 03, Centre for the Analysis of Regional Integration at Sussex, University of Sussex.
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    Citations

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    Cited by:

    1. Cherkashin, Ivan & Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2015. "Firm heterogeneity and costly trade: A new estimation strategy and policy experiments," Journal of International Economics, Elsevier, vol. 96(1), pages 18-36.
    2. Conconi, Paola & García-Santana, Manuel & Puccio, Laura & Venturini, Roberto, 2016. "From Final Goods to Inputs: the Protectionist Effect of Rules of Origin," CEPR Discussion Papers 11084, C.E.P.R. Discussion Papers.
    3. HAYAKAWA Kazunobu & URATA Shujiro & YOSHIMI Taiyo, 2017. "Choosing Between Multiple Preferential Tariff Schemes: Evidence from Japan's imports," Discussion papers 17002, Research Institute of Economy, Trade and Industry (RIETI).
    4. Anna Andersson, 2016. "Export Performance and Access to Intermediate Inputs: The Case of Rules of Origin Liberalisation," The World Economy, Wiley Blackwell, vol. 39(8), pages 1048-1079, August.
    5. Teti, Feodora & Felbermayr, Gabriel & Yalcin, Erdal, 2017. "Free Trade Agreements, Customs Unions In Disguise?," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168243, Verein für Socialpolitik / German Economic Association.
    6. Hayakawa, Kazunobu & Nuttawut, Laksanapanyakul & Yoshimi, Taiyo, 2018. "Tariff scheme choice," IDE Discussion Papers 684, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. KONDO Keisuke, 2015. "Input-Output Linkages of Japanese Affiliates in Mexico within NAFTA," Discussion papers 15143, Research Institute of Economy, Trade and Industry (RIETI).
    8. Sangkyom Kim & Innwon Park & Soonchan Park, 2013. "Trade-creating regime-wide rules of origin: a quantitative analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 20(11), pages 1056-1061, July.

    More about this item

    Keywords

    Intermediate goods; Rules of origin; Rules of cumulation; Firm heterogeneity; Gravity;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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