The gravity of rules of origin

This paper aims to provide a better understanding of how rules of origin (RoO's) operate and the influence they have on global trade flows. I construct an index to measure the restrictiveness of Rules of Origin using a new database gathered by the OECD /World Bank, which compiles all product level Rules of Origin for 159 Trade Agreements, and Regime Wide Rules of Origin for 310 agreements, covering 190 countries. I then present an augmented gravity model where I operationalise my index in order to study the impact of Rules of Origin on bilateral trade flows from 1996 to 2017. I find that an increase in the restrictiveness of Product Specific Rules is related to a decrease in bilateral trade flows, whereas an increase in the flexibility mechanism of Regime Wide rules is related to an increase in bilateral trade flows.