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Research article - Peer-reviewed, 2016

Export Performance and Access to Intermediate Inputs: The Case of Rules of Origin Liberalisation

Andersson, Anna


Internationally fragmented production processes have highlighted the need of efficient sourcing from foreign suppliers. This paper aims to investigate how exports of final goods are affected by better access to foreign intermediate inputs. In particular, the paper empirically tests whether expanding the set of available intermediate input suppliers through preferential rules of origin liberalisation affects exports of final goods. We exploit the introduction of the southern Mediterranean countries into the Pan-Euro-Med zone of diagonal cumulation which meant that foreign intermediate inputs could be used from more countries than before without jeopardising the preferential access to the EU. Using a fixed effects specification that controls for detailed levels of unobserved heterogeneity and multilateral resistance, we examine the effect of the new diagonal cumulation possibilities on southern Mediterranean exports to EU-15. We find a positive effect on both export intensity, the value of exports, and export diversification, the number of exported products. Being part of the Pan-Euro-Med zone of diagonal cumulation is associated with a 20per cent increase in export intensity and a 5per cent increase in export diversification.

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World Economy
2016, Volume: 39, number: 8, pages: 1048-1079

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