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Public quality standards and the food industry’s structure in a global economy

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  • Gaigné, Carl
  • Larue, Bruno

Abstract

We study the impact of public quality standards on industry structure in a context of international trade. We consider vertical differentiation in an international trade model based on monopolistic competition in which firms differ in terms of their productivity and must incur two fixed export costs when exporting to any given destination: a generic one (i.e., setting up a distribution system) and a destination-specific one to meet the quality standard prevailing in the importing country. Variable costs are also increasing in quality. The absolute mass of firms in any given country is decreasing in the domestic standard, but the relative mass (market share) of foreign firms is increasing in the domestic standard. Increasing public quality standards benefit highly productive foreign firms which gain from the quality-induced exit of less productive domestic and foreign firms. The increase in industry productivity following stricter public standards does not result from induced innovation as in the Porter hypothesis but from the exit of less productive firms.

Suggested Citation

  • Gaigné, Carl & Larue, Bruno, . "Public quality standards and the food industry’s structure in a global economy," Review of Agricultural, Food and Environmental Studies, Institut National de la Recherche Agronomique (INRA), vol. 97(2).
  • Handle: RePEc:ags:frrfes:277769
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    Cited by:

    1. Carl GAIGNÉ & Cathie LAROCHE DUPRAZ & Alan MATTHEWS, 2015. "Thirty years of European research on international trade in food and agricultural products," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 96(1), pages 91-130.
    2. Fugazza, Marco & Olarreaga, Marcelo & Ugarte, Cristian, 2018. "On the heterogeneous effects of market access barriers: evidence from small and large Peruvian exporters," CEPR Discussion Papers 12876, C.E.P.R. Discussion Papers.
    3. Disdier, Anne-Célia & Gaigné, Carl & Herghelegiu, Cristina, 2016. "Firm Exports and Quality Standards: Evidence from French Food Industry," 149th Seminar, October 27-28, 2016, Rennes, France 244783, European Association of Agricultural Economists.

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