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Improving Preferential Market Access through Rules of Origin: Firm-Level Evidence from Bangladesh

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  • Tobias Sytsma

Abstract

In countries where there exist limited opportunities to source inputs locally, rules of origin undermine access to preferential trade agreements for final goods exporters. I analyze the 2011 revision to the rules of origin associated with the European Union's Generalized System of Preferences, which allowed apparel producers in least developed countries to use internationally sourced textiles in exported products. Using transaction-level data on Bangladeshi apparel firms, I find that the rules of origin effectively cut the preferential margin by three-fourths. Liberalizing the rules of origin resulted in firm-level revenue growth, which was driven by the intensive margin through increased shipment sizes and quality upgrading.

Suggested Citation

  • Tobias Sytsma, 2022. "Improving Preferential Market Access through Rules of Origin: Firm-Level Evidence from Bangladesh," American Economic Journal: Economic Policy, American Economic Association, vol. 14(1), pages 440-472, February.
    • Handle: RePEc:aea:aejpol:v:14:y:2022:i:1:p:440-72
    DOI: 10.1257/pol.20200257
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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