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Firm heterogeneity, Rules of Origin and Rules of Cumulation

  • Pamela Bombarda

    ()

    (THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS)

  • Elisa Gamberoni

    (Elisa Gamberoni - World Bank)

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.

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Paper provided by HAL in its series Post-Print with number hal-00874949.

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Date of creation: 23 Jan 2013
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Publication status: Published in International Economic Review, Wiley, 2013, Volume 54 (issue 1), pp.307-328. <10.1111/j.1468-2354.2012.00734.x>
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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  1. Diego Puga & Tony Venables, 1995. "Preferential trading arrangements and industrial location," LSE Research Online Documents on Economics 2151, London School of Economics and Political Science, LSE Library.
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