Trade, price and quality upgrading effects of agri-food standards

Abstract

This paper assesses how cross-country differences in public mandatory food standards affect trade, prices and product quality upgrading in the agri-food sector. We estimate different gravity-type models that exploit the bilateral difference in maximum residue limits (MRLs) over the period from 2005 to 2014 for 145 products across 59 countries. Our findings show that cross-country differences in MRLs restrict trade. However, conditional on trading, they increase product prices-even when we adjust prices for quality-with null effects on estimated product quality. These effects are pronounced for South-North trade but not for exports to the South.