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Kazunobu Hayakawa, Nuttawut Laksanapanyakul, Hiroshi Mukunoki, Shujiro Urata, Impact of Free Trade Agreement Use on Import Prices, The World Bank Economic Review, Volume 33, Issue 3, October 2019, Pages 643–660, https://doi.org/10.1093/wber/lhx026
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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.