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Re-estimating the effects of stricter standards on trade: endogeneity matters

Author

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  • Anirudh Shingal
  • Malte Ehrich
  • Liliana Foletti

Abstract

In their meta-analysis of estimates of the impact of technical barriers to trade, Li and Beghin (2012) note that studies using pesticides Maximum Residue Levels (MRLs) tend to find more trade impeding effects, but these studies do not directly address the problem of endogeneity in the standards-trade relationship. Using pesticides MRL data for 53 countries over 2005-2014, we re-examine the trade effects of stricter standards accounting fully for endogeneity using three-way fixed effects. We find that the direction of the estimated trade effects gets reversed and we discuss why endogeneity biases the estimates downwards. In another original contribution, we examine the standards-trade relationship by the direction of imposition of stricter standards for a large panel. Our results suggest that stricter standards facilitate trade, irrespective of who imposes them.

Suggested Citation

  • Anirudh Shingal & Malte Ehrich & Liliana Foletti, 2017. "Re-estimating the effects of stricter standards on trade: endogeneity matters," RSCAS Working Papers 2917/20, European University Institute.
    • Handle: RePEc:rsc:rsceui:2917/20
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    References listed on IDEAS

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    1. James E. Anderson & Yoto V. Yotov, 2012. "Gold Standard Gravity," NBER Working Papers 17835, National Bureau of Economic Research, Inc.
    2. Yuan Li & Bo Xiong & John C Beghin, 2017. "The Political Economy of Food Standard Determination: International Evidence from Maximum Residue Limits," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 14, pages 239-267, World Scientific Publishing Co. Pte. Ltd..
    3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    4. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    5. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    6. Achterbosch, Thom J. & Engler, Alejandra & Rau, Marie-Luise & Toledo, Roger, 2009. "Measure the measure: the impact of differences in pesticide MRLs on Chilean fruit exports to the EU," 2009 Conference, August 16-22, 2009, Beijing, China 51765, International Association of Agricultural Economists.
    7. Baier, Scott L. & Bergstrand, Jeffrey H. & Feng, Michael, 2014. "Economic integration agreements and the margins of international trade," Journal of International Economics, Elsevier, vol. 93(2), pages 339-350.
    8. Baldwin, Richard, 2000. "Regulatory Protectionism, Developing Nations and a Two-Tier World Trade System," CEPR Discussion Papers 2574, C.E.P.R. Discussion Papers.
    9. Knut Blind & Andre Jungmittag, 2005. "Trade and the impact of innovations and standards: the case of Germany and the UK," Applied Economics, Taylor & Francis Journals, vol. 37(12), pages 1385-1398.
    10. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    Cited by:

    1. Hejazi, Mina & Grant, Jason H. & Peterson, Everett, 2022. "Trade impact of maximum residue limits in fresh fruits and vegetables," Food Policy, Elsevier, vol. 106(C).
    2. Anirudh Shingal & Malte Ehrich, 2019. "Trade effects of standards harmonization in the EU: improved access for non-EU partners," Indian Council for Research on International Economic Relations (ICRIER) Working Paper 372, Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India.
    3. Olaide Akin-Olagunju & Abiodun Falusi & Sulaiman Yusuf & Victor Okoruwa, 2022. "Does Pesticide Regulation Impact the Export Competitiveness of Major Global Cocoa Producers?," Journal of African Trade, Springer, vol. 9(1), pages 47-72, December.
    4. Akin-Olagunju, O. & Yusuf, S. & Okoruwa, V., 2018. "Harmonization of Sanitary and Phytosanitary Standards in Cocoa Trade: How Competitive are the Major Exporting Countries?," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277463, International Association of Agricultural Economists.

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    More about this item

    Keywords

    Sanitary and Phytosanitary Measures; MRL Regulation; Relative Stringency; Endogeneity; Trade; Gravity;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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