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Estimation of product quality in China's food processing and manufacturing industries

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  • Sun, Sizhong
  • Anwar, Sajid

Abstract

Using a product variety model, where higher-quality products increase consumer utility and quality products are more costly to produce, we show that optimal product quality depends on a parameter of the consumer utility function and the firm's cost of production. Our theoretical analysis shows that a firm's unobserved product quality is structurally linked to its observed sales revenue; the structural relationship allows estimation of the product quality within an industry. We then utilize firm-level data from China from 2005 to 2007 to estimate product quality in China's (i) food processing and (ii) food manufacturing industries. By comparing the distributions of product quality (and product quality growth rates) over time, we argue that product quality in both industries is improving.

Suggested Citation

  • Sun, Sizhong & Anwar, Sajid, 2022. "Estimation of product quality in China's food processing and manufacturing industries," Economic Modelling, Elsevier, vol. 107(C).
    • Handle: RePEc:eee:ecmode:v:107:y:2022:i:c:s0264999321002704
    DOI: 10.1016/j.econmod.2021.105681
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    Cited by:

    1. Sizhong Sun, 2023. "Firm heterogeneity, worker training and labor productivity: the role of endogenous self-selection," Journal of Productivity Analysis, Springer, vol. 59(2), pages 121-133, April.

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    More about this item

    Keywords

    Food processing; Food manufacturing; Product quality; China;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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