Trade, price and quality upgrading effects of agri-food standards[Endogenous Trade Policy with Heterogeneous Firms]

This paper assesses how cross-country differences in public mandatory food standards affect trade, prices and product quality upgrading in the agri-food sector. We estimate different gravity-type models that exploit the bilateral difference in maximum residue limits (MRLs) over the period from 2005 to 2014 for 145 products across 59 countries. Our findings show that cross-country differences in MRLs restrict trade. However, conditional on trading, they increase product prices—even when we adjust prices for quality—with null effects on estimated product quality. These effects are pronounced for South–North trade but not for exports to the South.