Do Food Scares Explain Supplier Concentration? An Analysis of EU Agri-food Imports

This paper documents a decreasing trend in the geographical concentration of EU agrofood imports. Decomposing the concentration indices into intensive and extensive margins components, we find that the decrease in overall concentration indices results from two diverging trends: the pattern of trade diversifies at the extensive margin (EU countries have been sourcing their agri-food products from a wider range of suppliers), while geographical concentration increases at the intensive-margin (EU countries have concentrated their imports on a few major suppliers). This leads to an increasing inequality in market shares between a small group of large suppliers and a majority of small suppliers. We then move on to exploit a database of food alerts at the EU border that had never been exploited before. After coding it into HS8 categories, we regress the incidence of food alerts by product on determinants including exporter dummies as well as HS8 product dummies. Coefficients on product dummies provide unbiased estimates of the intrinsic vulnerability of exported products to food alerts, as measured at the EU border. We incorporate the product risk coefficient as an explanatory variable in a regression of geographical concentration and show that concentration is higher for risky products.