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Does trade weaken product standards?

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  • Katia Berti
  • Rod Falvey

Abstract

We investigate the effects of trade on national minimum quality standards for a product whose quality is unobservable to consumers prior to purchase. Two standard‐setting regimes are considered: (1) where the regulatory authority takes the trade share as given; and (2) where the regulatory authority takes full account of its ability to influence the trade share. We find that standards are not a protectionist instrument in this model, the usual gains from trade apply if standards are maintained at their autarky values, trade can cause private standards to be adjusted in a welfare reducing way, and the welfare of a country is higher if its regulatory authority adopts regime (2) rather than (1).

Suggested Citation

  • Katia Berti & Rod Falvey, 2018. "Does trade weaken product standards?," Review of International Economics, Wiley Blackwell, vol. 26(4), pages 852-868, September.
    • Handle: RePEc:bla:reviec:v:26:y:2018:i:4:p:852-868
    DOI: 10.1111/roie.12345
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    References listed on IDEAS

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