Download or read book Firm Heterogeneity, Rules of Origin, and Rules of Cumulation written by Pamela Bombarda and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article sheds light on the restrictive nature of rules of origin (ROO) and on the role of diagonal cumulation in mitigating the protectionist content of ROO. Empirical evidence suggests that diagonal cumulation has beneficial effects on trade -- particularly among spoke countries. We show that these patterns can be reconciled with a theoretical setting where heterogeneous firms buy intermediate inputs from domestic and foreign sources. The model finds that switching from bilateral to diagonal cumulation relaxes the restrictiveness of the ROO and leads the least productive exporters to stop exporting.