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

We investigate how rising sanitary risk of agri-food products affects the geographical concentration of European Union (EU) imports at the product level. We first estimate a product-specific measure of sanitary risk based on the count of food alerts at EU borders. Then we regress the evolution of geographical concentration indices on our measure of product risk and year. We find that product sanitary risk indeed affected the EU import pattern. Overall, the EU diversified its import sources, but with diversification at the extensive margin and concentration at the intensive margin. This pattern is stronger for risky products, leading to a two-tier system.