DP17882 Rules of Origin and Exporters' Value-Added

• Dzmitry Kniahin Marcelo Olarreaga
6 Feb 2023

We explore the non-monotonic relationship between the restrictiveness of rules of origin (ROO) and beneficiaries’ value-added embedded in preferential exports. Using data for the European Union’s GSP schemes, we calculate the value-added maximizing level of ROO restrictiveness. Results suggest that current levels of restrictiveness in the European Union’s GSP schemes are not statistically different from optimal levels. More lenient ROO, as sometimes requested by GSP beneficiaries, would reduce their value-added to the benefit of foreign input providers.