Equivalence of Organic Standards as a Signal of Affinity: a Gravity Model of Italian Agricultural Trade

The literature about gravity models stresses that bilateral trade flows among countries is influenced by GDP factors and transaction costs. If compared to the previous literature our paper shows a twofold novelty. First, at the best of our knowledge it is the first attempt to analyse the bilateral trade of agricultural goods for Italy by a cross country and panel analysis in a gravity model and second it provides an original specification for transaction costs. In particular, we assume that the level of organic certification standards equivalence between Italy and extra-European countries could represent a good “proxy” for affinity in bilateral trading relationships concerning the agricultural sector both for organic and non organic products. Interestingly we find that the absence of specific import equivalence rules between Italy and other extra-European countries decreases the level of bilateral trade. The policy agenda about equivalence of the organic agricultural standards should be tackled in the context of a more complex agenda concerning the affinity of political, cultural and social practices among different regions in the agricultural sector.