Firm heterogeneity, Rules of Origin and Rules of Cumulation

Pamela Bombarda and Elisa Gamberoni

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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.

Keywords: Intermediate goods; Rules of origin; Rules of cumulation; Firm heterogeneity; Gravity (search for similar items in EconPapers)
Date: 2013-01-23
Note: View the original document on HAL open archive server: https://hal.science/hal-00874949
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Citations: View citations in EconPapers (18)

Published in International Economic Review, 2013, Volume 54 (issue 1), pp.307-328. ⟨10.1111/j.1468-2354.2012.00734.x⟩

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Working Paper: Firm Heterogeneity, Rules of Origin and Rules of Cumulation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00874949

DOI: 10.1111/j.1468-2354.2012.00734.x

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