Work

Impact of Free Trade Agreement Use on Import Prices

Year: 2017

Type: article

Abstract: We examine the impact of free trade agreement (FTA) use on import prices. For this analysis, we employ establishment-level import data with information on tariff schemes, that is, the FTA and most-favored-nation schemes used for importing. Unlike previous studies, we estimate the effects of FTA use on prices by controlling for differences in importing-firm characteristics. There are three main findings. First, the effect of FTA use is overestimated when not controlling for importing firm-related fixed effects. Second, on average, firms’ FTA use reduces tariffs by 12 percentage points and raises import prices by 3.6–6.7 percent. Third, in general, we do not find a price rise resulting from the costs of complying with rules of origin.

Source: The World Bank Economic Review

DOI: 10.1093/wber/lhx026

Authors: Kazunobu Hayakawa, Nuttawut Laksanapanyakul, Hiroshi Mukunoki, Shujiro Urata

Institutions: Institute of Developing Economies, Japan External Trade Organization, Thailand Development Research Institute, Gakushuin University, Waseda University

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: Japan Society for the Promotion of Science

Award: Analyses of changes in international division of labor through digital economy