Trade Networks and Diffusion of Regulatory Standards

We study network effects in the diffusion of regulatory standards through international trade. Our results show that countries are more likely to domestically adopt regulations that they comply with while exporting. We find evidence of such diffusion primarily in regulations concerning attributes of the final product rather than production processes. Consistent with a network effect, we show that countries more open to international trade are the drivers of regulatory diffusion. In an analysis of diffusion in individual features within labelling regulations—the most prevalent regulations in our data—we find that labelling requirements ensuring the safety of use propagate the most, and countries tend to domestically adopt features similar to those imposed by their importing partners. Overall, our results support the argument that economic integration can facilitate the strengthening of regulatory standards