Estimating the trade effects of the EU food quality policy

We investigate the relationship between international trade and product quality using the EU food policy on Geographical Indications (GIs). Building on the quality sorting model proposed by Crozet et al. (2012), we derive three predictions about the relationship between the EU quality policy and different trade margins (extensive and intensive) as well as firms export prices. To test these predictions, we create a new dataset that collects country information on GIs and bilateral trade flows during the period 1996-2014, at HS 6-digit level. We empirically test the theoretical model through Poisson Pseudo Maximum Likelihood (PPML) estimation procedure on panel data. The main results show that GIs affect trade but differently, depending on whether GIs are produced in the exporter or importer country. In particular, the presence of GIs in the exporter country seems to exert a pro-competitive effect, while when registered only in the importer country, GIs act as an anti-competitive measure.