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Irene IODICE - UNIVERSITY OF BIELEFELD

"Technical Regulations, Intermediate Inputs and Firms’ Sourcing Decisions "
joint with Camille Reverdy

Abstract : This paper examines the impact of standards on supply chains, focusing on how Technical Barriers to Trade (TBTs) affect intermediate input sourcing. We extend the model in Grossman and Helpman (2021) to investigate changes in firms’ import quantities and prices. Using a novel database of TBTs and French importer data, we find that TBTs implemented by the EU increase EU supplier imports by 4%, lead to a 2% price increase, and result in a 4.5% reduction in imports from non-EU countries. This shift disfavors suppliers in less developed countries and those with weaker EU trade ties, suggesting that adjustment costs are influenced by regulatory distance. Supply chains with relationship-specific investments are less susceptible to standard changes.