Summary

This paper examines the importance of standards in influencing whether firms in developing countries export opportunities agricultural and food products. Overall, the authors demonstrate that more stringent SPS standards in importing markets have a negative effect on developing country firm exports and reduce the probability that they will export, as well as export value and volumes. They also acts as a deterrent against new market entry and lead to an increase in exiting rates. The authors note a strong heterogeneity of effects accross exporting firms, with smaller exporters being more negatively affected.

Abstract

The paper estimates the effect of product standards on firms’ export decisions using two novel datasets. The first covers all exporting firms in 42 developing countries. The second covers pesticide standards for 243 agricultural and food products in 63 importing countries over 2006–12. The analysis shows that product standards significantly affect foreign market access. More restrictive standards in the importing country, relative to the exporting country, lower firms’ probability of exporting as well as their export values and quantities. The relative restrictiveness of standards also deters exporting firms from entering new markets and leads to higher exit rates from those markets. Moreover, firm characteristics mediate the effect of product standards on firms’ export decisions. Smaller exporters are more negatively affected in their market entry and exit decisions by the relative stringency of standards than larger exporters. Positive network effects of exporters from the same country may help reduce the burden of importing countries’ standards on firms’ decisions to enter new markets.

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