The Combination of Gravity and Welfare Approaches for Evaluating Nontariff Measures

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This article explores the link between gravity and welfare frameworks for measuring the impact of nontariff measures. First, an analytical approach suggests how to combine a gravity equation with a partial equilibrium model to determine the welfare impact of nontariff measures. Second, an empirical application focuses on the effects of a standard that caps antibiotic residues in crustaceans in the United States, the European Union, Canada, and Japan. While the econometric estimation of the gravity equation reports a negative impact on imports, welfare evaluations show that in most cases, a stricter standard leads to an increase in both domestic and international welfare.