The cost of compliance with product standards for firms in developing countries: an econometric study
AbstractStandards and technical regulations exist to protect consumer safety or to achieve other goals, such as ensuring the interoperability of telecommunications systems, for example. Standards and technical regulations can, however, raise substantially both start-up and production costs for firms. Maskus, Otsuki, and Wilson develop econometric models to provide the first estimates of the incremental production costs for firms in developing nations in conforming to standards imposed by major importing countries. They use firm-level data generated from 16 developing countries in the World Bank Technical Barriers to Trade (TBT) Survey Database. Their findings indicate that standards do increase short-run production costs by requiring additional inputs of labor and capital. A 1 percent increase in investment to meet compliance costs in importing countries raises variable production costs by between 0.06 and 0.13 percent, a statistically significant increase. The authors also find that the fixed costs of compliance are nontrivial-approximately $425,000 per firm, or about 4.7 percent of value added on average. The results may be interpreted as one indication of the extent to which standards and technical regulations might constitute barriers to trade. While the relative impact on costs of compliance is relatively small, these costs can be decisive factors driving export success for companies. In this context, there is scope for considering that the costs associated with more limited exports to countries with import regulations may not conform to World Trade Organization rules encouraging harmonization of regulations to international standards, for example. Policy solutions then might be sought by identifying the extent to which subsidies or public support programs are needed to offset the cost disadvantage that arises from nonharmonized technical regulations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3590.
Date of creation: 01 May 2005
Date of revision:
Environmental Economics&Policies; Economic Theory&Research; Health Economics&Finance; Administrative&Regulatory Law; Science Education;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2005-12-14 (Agricultural Economics)
- NEP-ALL-2005-12-14 (All new papers)
- NEP-COM-2005-12-14 (Industrial Competition)
- NEP-INT-2005-12-14 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ronald Fischer & Pablo Serra, 1998.
"Standards and Protection,"
Documentos de Trabajo
45, Centro de Economía Aplicada, Universidad de Chile.
- James Harrigan, 1996.
"Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model,"
NBER Working Papers
5722, National Bureau of Economic Research, Inc.
- Harrigan, James, 1997. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review, American Economic Association, vol. 87(4), pages 475-94, September.
- James Harrigan, 1996. "Technology, factor supplies, and international specialization: estimating the neoclassical model," Staff Reports 15, Federal Reserve Bank of New York.
- Otsuki, Tsunehiro & Wilson, John S. & Sewadeh, Mirvat, 2001. "Saving two in a billion: : quantifying the trade effect of European food safety standards on African exports," Food Policy, Elsevier, vol. 26(5), pages 495-514, October.
- Swann, Peter & Temple, Paul & Shurmer, Mark, 1996. "Standards and Trade Performance: The UK Experience," Economic Journal, Royal Economic Society, vol. 106(438), pages 1297-1313, September.
- Morrison, Catherine J, 1988. "Quasi-Fixed Inputs in U.S. and Japanese Manufacturing: A Generalized Leontief Restricted Cost Function Approach," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 275-87, May.
- Wilson, John S. & Tsunehiro Otsuki, 2002.
"To spray or not to spray? - pesticides, banana exports, and food safety,"
Policy Research Working Paper Series
2805, The World Bank.
- Wilson, John S. & Otsuki, Tsunehiro, 2004. "To spray or not to spray: pesticides, banana exports, and food safety," Food Policy, Elsevier, vol. 29(2), pages 131-146, April.
- Jones, Philip & Hudson, John, 1996. "Standardization and the costs of assessing quality," European Journal of Political Economy, Elsevier, vol. 12(2), pages 355-361, September.
- Maskus, Keith E. & Wilson, John S. & Tsunehiro Otsuki, 2000. "Quantifying the impact of technical barriers to trade : a framework for analysis," Policy Research Working Paper Series 2512, The World Bank.
- Andrew B. Bernard & J. Bradford Jensen, 2000.
"Understanding Increasing and Decreasing Wage Inequality,"
in: The Impact of International Trade on Wages, pages 227-268
National Bureau of Economic Research, Inc.
- Andrew B. Bernard & J. Bradford Jensen, 1998. "Understanding Increasing and Decreasing Wage Inequality," NBER Working Papers 6571, National Bureau of Economic Research, Inc.
- Gasiorek, Michael & Smith, Alasdair & Venables, Anthony J., 1992. "`1992': Trade and Welfare; A General Equilibrium Model," CEPR Discussion Papers 672, C.E.P.R. Discussion Papers.
- Berndt, Ernst R. & Hesse, Dieter M., 1986. "Measuring and assessing capacity utilization in the manufacturing sectors of nine oecd countries," European Economic Review, Elsevier, vol. 30(5), pages 961-989, October.
- Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-68, August.
- Sven Anders & Julie Caswell, 2007.
"Standards-as-Barriers versus Standards-as-Catalysts: Assessing the Impact of HACCP Implementation on U.S. Seafood Imports,"
2007-7, University of Massachusetts Amherst, Department of Resource Economics.
- Sven M. Anders & Julie A. Caswell, 2007. "Standards as Barriers Versus Standards as Catalysts: Assessing the Impact of HACCP Implementation on U.S. Seafood Imports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 310-321.
- Jaud, Mélise & Cadot, Olivier & Suwa-Eisenmann, Akiko, 2010.
"Do Food Scares Explain Supplier Concentration? An Analysis of EU Agri-food Imports,"
CEPREMAP Working Papers (Docweb)
- Mélise Jaud & Olivier Cadot & Akiko Suwa-Eisenmann, 2013. "Do food scares explain supplier concentration? An analysis of EU agri-food imports," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 40(5), pages 873-890, December.
- Mélise Jaud & Olivier Cadot & Akiko Suwa-Eisenmann, 2009. "Do food scares explain supplier concentration? An analysis of EU agri-food imports," PSE Working Papers halshs-00574963, HAL.
- Cadot, Olivier & Jaud, Mélise & Suwa Eisenmann, Akiko, 2009. "Do Food Scares Explain Supplier Concentration? An Analysis of EU Agri-food Imports," CEPR Discussion Papers 7431, C.E.P.R. Discussion Papers.
- Juan Carlos Hallak & Jagadeesh Sivadasan, 2009.
"Firms' Exporting Behavior under Quality Constraints,"
NBER Working Papers
14928, National Bureau of Economic Research, Inc.
- Juan Carlos Hallak & Jagadeesh Sivadasan, 2010. "Firms' Exporting Behavior under Quality Constraints," Working Papers 99, Universidad de San Andres, Departamento de Economia, revised Mar 2010.
- Juan Carlos Hallak & Jagadeesh Sivadasan, 2009. "Firms' Exporting Behavior under Quality Constraints," Working Papers 09-13, Center for Economic Studies, U.S. Census Bureau.
- Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2011. "Firms' Exporting Behavior under Quality Constraints," Working Papers 628, Research Seminar in International Economics, University of Michigan.
- Tomás Castagnino, 2011. "What Drives firms´ Geographic Diversification in International Markets?," BCRA Working Paper Series 201152, Central Bank of Argentina, Economic Research Department.
- Juan Carlos Hallak, 2006.
"A Product-Quality View of the Linder Hypothesis,"
NBER Working Papers
12712, National Bureau of Economic Research, Inc.
- van Tongeren, Frank & Beghin, John C. & Marette, Stephan, 2009.
"A Cost-Benefit Framework for the Assessment of Non-Tariff Measures in Agro-Food Trade,"
Staff General Research Papers
13146, Iowa State University, Department of Economics.
- Frank van Tongeren & John Beghin & Stéphane Marette, 2009. "A Cost-Benefit Framework for the Assessment of Non-Tariff Measures in Agro-Food Trade," OECD Food, Agriculture and Fisheries Papers 21, OECD Publishing.
- Souza, Mauricio Jorge Pinto de & Burnquist, Heloisa Lee, 2008. "Importância Das Exigências Técnicas À Exportação De Empresas Brasileiras," 46th Congress, July 20-23, 2008, Rio Branco, Acre, Brasil 96281, Sociedade Brasileira de Economia, Administracao e Sociologia Rural (SOBER).
- Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2008. "Productivity, quality and exporting behavior under minimum quality constraints," MPRA Paper 24146, University Library of Munich, Germany.
- Itzhak Goldberg & Lee Branstetter & John Gabriel Goddard & Smita Kuriakose, 2008. "Globalization and Ttechnology Absorption in Europe and Central Asia : The Role of Trade, FDI, and Cross-Border Knowledge Flows," World Bank Publications, The World Bank, number 6445, March.
- Henson, Spencer & Masakure, Oliver & Cranfield, John, 2011. "Do Fresh Produce Exporters in Sub-Saharan Africa Benefit from GlobalGAP Certification?," World Development, Elsevier, vol. 39(3), pages 375-386, March.
- Chen, Maggie Xiaoyang & Otsuki, Tsunehiro & Wilson, John S., 2006. "Do standards matter for export success ?," Policy Research Working Paper Series 3809, The World Bank.
- Veliko Dimitrov & Vladimir Dubrovskiy & Irina Orlova, 2007. "Institutional Harmonization in the Context of Relations Between the EU and Its Eastern Neighbours: Costs and Benefits and Methodologies of Their Measurement," CASE Network Reports 0075, CASE-Center for Social and Economic Research.
- Anders, Sven & Caswell, Julie A., 2006. "Assessing the Impact of Stricter Food Safety Standards on Trade: HACCP in U.S. Seafood Trade with the Developing World," 2006 Annual meeting, July 23-26, Long Beach, CA 21338, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Gabriel Sánchez & María Laura Alzúa & Inés Butler, 2008. "Impact of Technical Barriers to Trade on Argentine Exports and Labor Markets," CEDLAS, Working Papers 0079, CEDLAS, Universidad Nacional de La Plata.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.