Rules of Origin and Market Power

41 Pages Posted: 15 Mar 2021

See all articles by Wanyu Chung

Wanyu Chung

University of Birmingham - Department of Economics

Carlo Perroni

University of Warwick - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: March 2021

Abstract

We study how regional 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.

JEL Classification: D43, F12, F13, F14

Suggested Citation

Chung, Wanyu and Perroni, Carlo, Rules of Origin and Market Power (March 2021). CEPR Discussion Paper No. DP15897, Available at SSRN: https://ssrn.com/abstract=3805312

Wanyu Chung (Contact Author)

University of Birmingham - Department of Economics ( email )

United States

Carlo Perroni

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
44 24 7652 8416 (Phone)
44 24 7652 3032 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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