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Estimating the effect of chemical safety standards on firm performance in Malaysia and Vietnam

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Author Info

  • Otsuki, Tsunehiro
  • Michida, Etsuyo
  • Nabeshima, Kaoru
  • Ueki, Yasushi

Abstract

This paper uses firm-level data to examine the impact of chemical safety regulations imposed by importing countries such as RoHS and REACH on the production costs and export performance of firms in Malaysia and Vietnam. We find that in addition to the initial setup costs for compliance, EU RoHS and REACH implementation causes firms to incur additional variable production costs by requiring additional labor and capital expenditures of around 12% of the variable costs, respectively. We also find that compliance with RoHS and REACH significantly increases the probability of export. Furthermore, we find that compliance with EU RoHS and REACH helps firms to penetrate into a greater variety of countries. Also, we find that multinational enterprises and firms participating in global value chains generally exhibit better export performance and their costs rise less steeply.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1310/1/ARRIDE_Discussion_No.455_otsuki.pdf
File Function: First version, 2014
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Bibliographic Info

Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 455.

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Date of creation: Mar 2014
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Publication status: Published in IDE Discussion Paper. No. 455. 2014.3
Handle: RePEc:jet:dpaper:dpaper455

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Related research

Keywords: Malaysia; Vietnam; Environmental protection; International trade; Environmental policy; Industrial standards; Costs; Trade; RoHS; REACH cost function; Market access;

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References

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  1. Niven Winchester & Marie-Luise Rau & Christian Goetz & Bruno Larue & Tsunehiro Otsuki & Karl Shutes & Christine Wieck & Heloisa L. Burnquist & Maurício J. Pinto de Souza & Rosane Nunes de Faria, 2012. "The Impact of Regulatory Heterogeneity on Agri-food Trade," The World Economy, Wiley Blackwell, vol. 35(8), pages 973-993, 08.
  2. Maertens, Miet & Swinnen, Johan F.M., 2009. "Trade, Standards, and Poverty: Evidence from Senegal," World Development, Elsevier, vol. 37(1), pages 161-178, January.
  3. Tien Manh Vu & Hiroyuki Yamada & Tsunehiro Otsuki, 2014. "The rise and fall of multinational enterprises in Vietnam: survival analysis using census data during 2000-2011," OSIPP Discussion Paper 14E001, Osaka School of International Public Policy, Osaka University.
  4. Miet Maertens & Liesbeth Colen & Johan F.M. Swinnen, 2008. "Globalization and Poverty in Senegal: A Worst Case Scenario?," LICOS Discussion Papers 21708, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  5. Bo Xiong & John C. Beghin, 2013. "Disentangling Demand-Enhancing and Trade-Cost Effects of Maximum Residue Regulations," Food and Agricultural Policy Research Institute (FAPRI) Publications 13-wp544, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  6. Sophie Drogue & Federica DeMaria, 2012. "Pesticide residues and trade, the apple of discord?," Working Papers 171676, Institut National de la Recherche Agronomique, France.
  7. Catherine Ragasa & Suzanne Thornsbury & Satish Joshi, 2011. "Are Food Certification Costs Misestimated? Exporter‐Perspective on the European Standard," Journal of Agricultural Economics, Wiley Blackwell, vol. 62(3), pages 669-689, 09.
  8. Honda, Keiichiro, 2012. "The effect of EU environmental regulation on international trade : restriction of hazardous substance as a trade barrier," IDE Discussion Papers 341, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  9. Chunlai Chen & Jun Yang & Christopher Findlay, 2008. "Measuring the Effect of Food Safety Standards on China’s Agricultural Exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(1), pages 83-106, April.
  10. Lionel Fontagné & Gianluca Orefice & Roberta Piermartini & Nadia Rocha, 2013. "Product Standards and Margins of Trade: Firm Level Evidence," Working Papers 2013-06, CEPII research center.
  11. Otsuki, Tsunehiro & S. Wilson, John, 2003. "Food Safety and Trade: Winners and Losers in a Non-Harmonized World," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 266-287.
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