Rules of Origin and Technology Spillovers from Foreign Direct Investment under International Duopoly

Naoto Jinji and Yoshihiro Mizoguchi

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: Using a simple three-country model of international duopoly, this study analyses the optimal choice of rules of origin (ROO) in a free trade area/agreement (FTA) when firms from outside the FTA must undertake foreign direct investment (FDI) in FTA countries and conduct part of their production process within the FTA to comply with the ROO. FDI causes spillovers of the superior production technology from a non-FTA firm to its competitor within the FTA, depending on how much of the production process is shifted to the FTA area. In this situation, we show that as the degree of multilateral trade liberalisation before formation of the FTA is higher, the optimal ROO tends to be less stringent.

Keywords: rules of origin; free trade area/agreement; foreign direct investment; technology spillovers; oligopoly (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Pages: 31
Date: 2015-12
New Economics Papers: this item is included in nep-cse and nep-int
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Related works:
Journal Article: Rules of origin and technology spillovers from foreign direct investment under international duopoly (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:kue:epaper:e-15-012

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