Product Quality and Sustainability: The Effect of International Environmental Agreements on Bilateral Trade

Stefan Borsky, Andrea Leiter and Michael Pfaffermayr

No 2017-06, Graz Economics Papers from University of Graz, Department of Economics

Abstract: This paper addresses the impact of sustainability in production on international trade. In particular, it examines the effect of the International Tropical Timber Agreement (ITTA) on tropical timber trade. The empirical analysis is based on a gravity equation in a difference-in-difference setting, which is estimated by a panel Heckman's selection model. This accounts for the potentially systematic selection of trading partners into timber trade activity. We then conduct a comprehensive comparative static analysis solving the structural gravity model with and without the ITTA. This allows us to determine the trade impact of an ITTA induced increase in sustainability for participating as well as for third-countries. We find that countries participating in the ITTA exhibit a significant and substantial increase in trade intensity ranging from 4% to 6%. Furthermore, we observe that this effect is more pronounced for smaller member countries. Non-ITTA countries are confronted with reduced tropical timber flows.

Keywords: Sustainable production standards; Product quality; Gravity equation; Panel sample selection (search for similar items in EconPapers)
JEL-codes: F18 L15 O19 Q23 Q27 (search for similar items in EconPapers)
Date: 2017-07
New Economics Papers: this item is included in nep-env, nep-int and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Product quality and sustainability: The effect of international environmental agreements on bilateral trade (2018)
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