Beghin, John C.; Li, Yuan

WP #13011, May 2013

We build a parsimonious partial equilibrium political-economy model for a tradable good associated with a negative externality mitigated by a single quality standard. The policy-maker solves for the standard that maximizes a weighted sum of welfare measures reflecting rent-seeking activities. Derived comparative statics are ambiguous but provide useful guidance for the econometric specification. We empirically implement the derived reduced form to econometrically investigate the determinants of protectionism in maximum residue limits affecting food trade among a large number of countries. Protectionism is measured using an index of stringency of MRLs relative to Codex international standards as in Li and Beghin (2012). Higher-income countries tend to protect their domestic market and their consumers’ health more than lower income countries do; MRL stringency and tariffs are substitute policy instruments; the impact of democratization on strictness of MRLs shows a inverted u-shaped pattern; and the quality of governmental institutions increases MRL protection.

JEL Classification: F13, Q17, Q18

Keywords: political economy, NTMs, Non-tariff measures, MRL, endogenous, NTBs, food trade, maximum residue limits

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