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Abstract

Recent empirical studies argue that the implementation of quality standards among agricultural exporters has the character of a fixed cost. However, this can be misleading if fixed costs are only understood in terms of required investments. Instead, we argue that standard adoption is the result of exporting countries’ private and public organisations managing to solve the standard implementation problem. We demonstrate that a newly developed theoretical approach to the role of problem solving in the production process can be interpreted as a model of a country’s ability to implement foreign trade standards. Predictions of this model are tested within a gravity framework: we compare the institutional characteristics of countries that successfully export fruit and vegetables to the EU (as a high standard market) against characteristics of countries that serve all markets. Results indicate that institutional characteristics like government effectiveness, regulatory quality and law enforcement are more relevant for exports to markets with relatively high standards than for overall exports.

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