Product standards, harmonization, and trade: evidence from the extensive margin

Ben Shepherd

No 4390, Policy Research Working Paper Series from The World Bank

Abstract: The author uses a new database of EU product standards in the textiles, clothing, and footwear sectors to present the first empirical evidence that international standards harmonization is associated with increased partner country export variety. A 10 percentage point increase in the proportion of internationally harmonized standards is associated with a 0.2 percent increase in partner country export variety, whereas a 10 percent increase in the total number of standards is associated with a nearly 6 percent decrease in product variety. Although small, the harmonization elasticity is statistically significant, and proves highly robust to sample changes and instrumental variables estimation using instruments motivated by political economy considerations. Moreover, it is found to be around 50 percent higher for low income countries, which suggests that they may be particularly constrained in adapting products to meet multiple standards. Numerical simulations show that these findings are consistent with a heterogeneous firms model of trade in which harmonization is beneficial at the extensive margin provided that any increases in compliance costs are not too large.

Keywords: Housing&Human Habitats; E-Finance and E-Security; Educational Technology and Distance Education; Mining&Extractive Industry (Non-Energy); E-Business (search for similar items in EconPapers)
Date: 2007-11-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (50)

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