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Product quality and sustainability: The effect of international environmental agreements on bilateral trade

Year: 2018

Type: article

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 theITTA. This allows us to determine the trade impact of anITTA‐induced increase in sustainability for participating as well as for third countries. We find that countries participating in theITTAexhibit a significant and substantial increase in trade values ranging from 4% to 6%. Furthermore, we observe that this effect is more pronounced for smaller member countries. Non‐ITTAcountries are confronted with reduced values of tropical timber trade flows.

Source: World Economy

DOI: 10.1111/twec.12718

Authors: Stefan Borsky, Andrea Leiter, Michael Pfaffermayr

Institutions: University of Graz, Universität Innsbruck

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Responsible consumption and production, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,570