This research explores the link between a gravity model and welfare frameworks and then applies the quantitative model system to analyze how trade and welfare is affected by the Minimum Required Performance Limits (MRPL) in the shrimp importing market of European Union.
The quantitative model system consists of two parts: first, this study uses the “phi-ness” gravity model to investigate the trade effects of MRPL on EU shrimp market. The “phi-ness” gravity model partitions the standard variables to avoid biased estimation caused by the correlation between time and country fixed effects and policy variables. The Poisson Pseudo Maximum Likelihood (PPML) method is incorporated into the estimation in order to control for the zero valued observations.
Second, based on the theoretic foundation of the gravity model, this research sets up the specific nested Constant Elasticity of Substitution (CES) model of consumers’ utility and further explores the linkage between these two models. The nested CES model incorporates the effects of MRPL on consumers’ confidence in domestic food as well as foreign food imported from developed and developing countries.
The empirical results confirm a consistent fact with previous empirical studies: stricter MRPL has significant and negative effects on trade integration between EU and trading partners with lower level of food safety standards. The welfare analysis shows that the zero tolerance policy of MRPL standard would dramatically enhance consumers’ demand for domestic shrimps and foreign shrimps imported from developed countries but reduce the quantity of shrimp supplied from developing countries. It is also indicated that the increased level of MRPL lead to an increase in welfare of domestic consumers, suppliers in developing countries, and in total international trade, as well as a decrease in the welfare of domestic suppliers and foreign suppliers from developed countries.
The empirical results also indicate that the combination of GM and Welfare Approach can also be applied to research on other standards or other industries.
| Identifer | oai:union.ndltd.org:uky.edu/oai:uknowledge.uky.edu:agecon_etds-1032 |
| Date | 01 January 2014 |
| Creators | Li, Xiaoqian |
| Publisher | UKnowledge |
| Source Sets | University of Kentucky |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | Theses and Dissertations--Agricultural Economics |
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