Seminar in International Economics: International spillovers of quality regulations

The Competence Centre for International Economics Research (FIW) kindly invites to participate in the Seminar in International Economics on the topic

International spillovers of quality regulations

Presenter: Luca Macedoni (Aarhus University)
Discussant: Mingzhi (Jimmy) Xu (Peking University, Asian Infrastructure Investment Bank)

Abstract:
This paper investigates the positive international spillover effects of non-discriminatory product regulations, such as quality standards. It will incorporate regulations into a multi-country general equilibrium framework with firm heterogeneity and variable mark-ups. The research models regulations as a fixed cost that any firm selling to an economy must pay, consistent with stylised facts that are presented. It is demonstrated that, in the presence of variable mark-ups, the fixed cost generates a positive spillover effect on the rest of the world, as it induces entry of high-quality firms and it improves the terms of trade of the non-imposing countries. The author argues that the benefits of such regulations are not fully realised under non-cooperative policy settings, leading to a call for international cooperation in setting regulations. The research estimates the model and applies its gravity formulation to quantify the global welfare consequences of altering regulatory policies, the extent of the positive externalities across countries, the effects of cooperation, and the comparison with further tariff liberalisation. The analysis reveals that the entry of new high-quality firms, rather than changes in terms of trade, serves as the main quantitative driver of international spillovers.

The presentation if available, will be posted after the event.

The seminar series is organised by the Vienna Institute for International Economic Studies (wiiw) in co-operation with FIW and the European University Institute. The seminar provides a forum for presentation and discussion of recent academic research in the field of international economics.