Regulatory Heterogeneity and Global Value Chain-Related Trade

In this paper, I estimate the impact of heterogeneity in non-tariff measures policies on countries’ global value chain-related trade and its backward and forward components. I first build a regulatory distance index, which measures the degree of dissimilarity in non-tariff measure structures between two trade partners. By including the regulatory distance index in a structural gravity model, I then find a significant negative effect of regulatory distance on total, backward, and forward global value chain-related trade. The negative impact is even more substantial when I restrict the analysis to manufacturing sectors. On the country dimension, I demonstrate that the effects of regulatory distance are associated with the exporters’ and the importers’ income levels