Abstract
This paper estimates the relation between technical regulations and firms’ export dynamics using country-sector indicators from two firm-level datasets—the novel UN ITC NTM Business Surveys and the World Bank Exporter Dynamics Database—for 18 developing countries over the 2010–2014 period. The results from the analysis indicate that export markets where exporters perceive technical regulations as more burdensome are characterized by a lower number of exporters, a lower value of exports, and a higher concentration rate. These results are in line with the prediction of the heterogeneous firms’ trade theory (Melitz, 2003): additional trade costs are expected to push some firms out of exporting, therefore reducing the total number of exporters and increasing concentration. Also, technical regulations hit small firms’ exports twice as hard as they hit large firms, confirming that smaller firms react more strongly to changes in trade costs.
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Data Availability
Data is property of the International Trade Centre (ITC), under the project “Non-Tariff Measures Business Surveys” (https://ntmsurvey.intracen.org/ntm-survey-data/). Data access, if granted, can be requested at: ntm@intracen.org.
Notes
Compliance with trade-related standards and regulations by a firm increases fixed and variable costs. This can influence market entry and postentry trade volumes and eventually alter trade patterns and competition (Kox and Nordås 2007; Otsuki et al. 2014, Chaney 2008, Bernard et al. 2011, and Crozet et al. 2013).
It uses the classification adopted to collect the ITC NTM Business Surveys to define technical regulations as follows: technical requirements, conformity assessment, and certification required by the exporting country.
More information about the ITC NTM Business Surveys can be found at http://www.intracen.org/itc/market-info-tools/non-tariff-measures/business-surveys/ and in ITC (2015b).
The World Bank Exporters Dynamics Dataset contains indicators that help measure different aspects of firm dynamics, exporter growth patterns, concentration, and diversification in the nonoil exporting sector. The sources for the data for each country and the cleaning procedure used to obtain the data are detailed in the Annex of Cebeci et al. (2012).
Using HS2digits has some limitations when analyzing the effects of NTMs, which tend to be product specific. Nonetheless, we obviate to the impossibility to use directly HS6 digits data by building indicators at the sector level. This indicator takes into account the number of HS6 digit product-partner markets where firms face a burdensome regulatory or procedural obstacle to trade associated with a technical regulation.
Market Access Map, International Trade Centre, www.macmap.org and http://www.macmap.org/SupportMaterials/Methodology.aspx#method_B11.
Tariffs are included as a control variable in our model. This paper does not look at the substitution effect between tariffs and NTMs and refer to the related literature for this (see Beverelli et al 2019).
Definition of firm size used: micro (1-4 employees) and small (5-20 employees), medium (21-to-100 employees), and large (more than 100 employees).
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Acknowledgements
The author thanks Marion Jansen, Olivier Fontagné, Jasmeer Virdee, two anonymous referees, and the participants of the 2016 Pronto Conference in Vienna, the 2016 DEGIT Conference in Nottingham, and the 2016 ETSG Conference in Helsinki for useful comments and discussions. I acknowledge the efforts by the Trade and Market Intelligence team within ITC (Mondher Mimouni, Ursula Hermelink, and Abdellatif Benzakri), for generating the raw data and providing extensive support to understanding the surveys.
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Rollo, V. Technical regulations and exporters’ dynamics: evidence from developing countries. Int Econ Econ Policy 20, 189–212 (2023). https://doi.org/10.1007/s10368-023-00554-z
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DOI: https://doi.org/10.1007/s10368-023-00554-z