Chapter

The impact of Rules of Origin on strategic outsourcing: an IO perspective

Olivier Cadot, Antoni Estevadeordal, Akiko Suwa-Eisenmann and Thierry Verdier

in The Origin of Goods

Published in print February 2006 | ISBN: 9780199290482
Published online May 2006 | e-ISBN: 9780191603471 | DOI: http://dx.doi.org/10.1093/0199290482.003.0003
 The impact of Rules of Origin on strategic outsourcing: an IO perspective

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This chapter considers the impact of Rules of Origins (ROOs) on two aspects of the international production fragmentation process. First, in an imperfect competitive environment with ‘strategic outsourcing’ by firms, ROOs can fullfill the function of a commitment device to be more or less aggressive in the process of international fragmentation. Second, in a context when firm-suppliers relationships are characterized by some degree of contract incompleteness, ROOs may have important implications for the incomplete contractual problems existing between downward foreign firms and potential suppliers, especially by the way they influence the outside options of the concerned parties. ROOs in such a case can be effective even without been observed as binding in equilibrium. Normative and policy implications are derived.

Keywords: rules of origins; strategic outsourcing; incomplete contracting

Chapter.  12508 words.  Illustrated.

Subjects: International Economics

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