Rules of Origin and Market Power
Wanyu Chung and
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Carlo Perroni: University of Warwick and CESifo
The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics
We study how domestic content requirements in Free Trade Areas (FTAs) affect market power and market structure in concentrated intermediate goods markets. We show that content requirements increase oligopolistic markups beyond the level that would obtain under an equivalent import tariff, and we document patterns in Canadian export data and US producer price data that align with the model’s predictions : producers of intermediate goods charge comparatively higher prices when the associated final goods producers are more constrained by FTA origin requirements and by Most Favoured Nation (MFN) tariffs for both intermediate and final non-FTA goods.
Keywords: Free Trade Areas; Content Requirements; Market Power JEL codes: F12; F13; F14; D43 (search for similar items in EconPapers)
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Working Paper: Rules of Origin and Market Power (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1300
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