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Abstract

This research investigates the extent to which retailers' responses to detection of food hazards in the international supply chain hinge on whether the specific hazard detected represents an acute (versus chronic) health risk. We construct an econometric model that matches data on EU border rejections noticed under the Rapid Alert System for Food and Feed (RASFF) from 20062015 with 6-digit-level data on bilateral fruit and vegetable trade flows to analyze the effects of mycotoxin detection relative to the detection of excess pesticide residues on international sourcing. We find that the presence of mycotoxins - which can present acute human health risks - reduces future shipments into the EU by approximately 32% and has cost suppliers more than $43 billion in lost trade over the sample period. In contrast, border rejections due to pesticide residues - primarily a chronic health risk - do not have a statistically significant effect on international trade flows.

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