The cost of compliance with product standards for firms in developing countries: an econometric study
Abstract
Standards 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 Info
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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3590.Length:
Date of creation: 01 May 2005
Date of revision:
Handle: RePEc:wbk:wbrwps:3590
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Keywords: 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)
References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- 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.
- Juan Carlos Hallak & Jagadeesh Sivadasan, 2009.
"Firms' Exporting Behavior under Quality Constraints,"
Working Papers
09-13, Center for Economic Studies, U.S. Census Bureau.
- 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.
- Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2011. "Firms' Exporting Behavior under Quality Constraints," Working Papers 628, Research Seminar in International Economics, University of Michigan.
- Juan Carlos Hallak & Jagadeesh Sivadasan, 2009. "Firms' Exporting Behavior under Quality Constraints," NBER Working Papers 14928, National Bureau of Economic Research, Inc.
- 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.
- 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).
- Sven Anders & Julie Caswell, 2007.
"Standards-as-Barriers versus Standards-as-Catalysts: Assessing the Impact of HACCP Implementation on U.S. Seafood Imports,"
Working Papers
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.
- Juan Carlos Hallak, 2006.
"A Product-Quality View of the Linder Hypothesis,"
NBER Working Papers
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- 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.
- Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2008. "Productivity, quality and exporting behavior under minimum quality constraints," MPRA Paper 24146, University Library of Munich, Germany.
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"Do Food Scares Explain Supplier Concentration? An Analysis of EU Agri-food Imports,"
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