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Estimating the effect of chemical safety standards on firm performance in Malaysia and Vietnam

Discussion Papers


by Tsunehiro Otsuki, Etsuyo Michida, Kaoru Nabeshima and Yasushi Ueki
March 2014


This paper uses firm-level data to examine the impact of chemical safety regulations imposed by importing countries such as RoHS and REACH on the production costs and export performance of firms in Malaysia and Vietnam. We find that in addition to the initial setup costs for compliance, EU RoHS and REACH implementation causes firms to incur additional variable production costs by requiring additional labor and capital expenditures of around 12% of the variable costs, respectively. We also find that compliance with RoHS and REACH significantly increases the probability of export. Furthermore, we find that compliance with EU RoHS and REACH helps firms to penetrate into a greater variety of countries. Also, we find that multinational enterprises and firms participating in global value chains generally exhibit better export performance and their costs rise less steeply.

Keywords: trade, RoHS, REACH cost function, market access, Malaysia Vietnam
JEL classification: F14, L15, O53

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