Rules of Origin and Market Power

Wanyu Chung and Carlo Perroni

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: 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)
Date: 2020
New Economics Papers: this item is included in nep-com and nep-int
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https://warwick.ac.uk/fac/soc/economics/research/w ... p_1300_-_perroni.pdf

Related works:
Working Paper: Rules of Origin and Market Power (2021)
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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