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Impact of free trade agreement use on import prices

Kazunobu Hayakawa (), Nuttawut Laksanapanyakul, Hiroshi Mukunoki and Shujiro Urata

No 8416, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines the impact of free trade agreement (FTA) use on import prices. For this analysis, it employs establishment-level import data with information on tariff schemes, that is, the FTA and most-favored-nation schemes used for importing. Unlike previous studies, this paper estimates the effects of FTA use on prices by controlling for differences in importing-firm characteristics. There are three main findings. First, the effect of FTA use is overestimated when not controlling for importing firm-related fixed effects. Second, on average, firms'FTA use reduces tariffs by 12 percentage points and raises import prices by 3.6-6.7 percent. Third, in general, a price rise resulting from the costs of complying with rules of origin was not found.

Keywords: International Trade and Trade Rules; Private Sector Economics; Investment and Investment Climate; Trade Policy; Inequality (search for similar items in EconPapers)
Date: 2018-04-19
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