Re-Estimating the Effects of Stricter Standards on Trade: Endogeneity Matters

45 Pages Posted: 27 Mar 2017

See all articles by Anirudh Shingal

Anirudh Shingal

S.P. Jain Institute of Management & Research; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); University of Bern - World Trade Institute

Malte Ehrich

University of Goettingen (Göttingen)

Liliana Foletti

University of Geneva

Date Written: March 2017

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.

Keywords: Sanitary and Phytosanitary Measures, MRL Regulation, Relative Stringency, Endogeneity, Trade, Gravity

JEL Classification: F13, F14, I18

Suggested Citation

Shingal, Anirudh and Ehrich, Malte and Foletti, Liliana, Re-Estimating the Effects of Stricter Standards on Trade: Endogeneity Matters (March 2017). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2017/20, Available at SSRN: https://ssrn.com/abstract=2941399 or http://dx.doi.org/10.2139/ssrn.2941399

Anirudh Shingal (Contact Author)

S.P. Jain Institute of Management & Research ( email )

Munshi Nagar, Dadabhai Road
Andheri West
Mumbai, Maharashtra 119579
India

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

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50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

University of Bern - World Trade Institute ( email )

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Bern, 3012
Switzerland

HOME PAGE: http://www.nccr-trade.org

Malte Ehrich

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Liliana Foletti

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

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