Standards, trade margins and product quality: Firm-level evidence from Peru

Abstract

The ongoing debate on whether agri-food (public) regulatory standards are barriers or catalysts to trade is particularly pertinent for developing countries who are often standard-takers. Current evidence on the trade effects of regulatory standards is ambiguous. In this paper, we give a contribution focusing on the firm heterogeneity trade effects of (different) types of agri-food standards, considering firm-level exports from Peru. Particular emphasis is given to standards with different degree of restrictiveness, such as specific trade concerns (STCs) raised on the most stringent NTMs, and to product-quality upgrading. Results show that only the most restrictive NTMs significantly limit agri-food exports for Peruvian firms, affecting the probability to trade, firms’ exit and the export volume. Regular SPSs are found to enhance trade. Importantly, we uncovered relevant heterogonous effects of NTMs on firms of different size, showing that only the most stringent standards result in product quality upgrading.