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Do Standards Improve the Quality of Traded Products?

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  • Anne-Célia Disdier
  • Carl Gaigné
  • Cristina Herghelegiu

Abstract

We examine whether standards raise the quality of traded products by correcting market failures associated with information asymmetry on product attributes. Our predictions on their quality and selection effects are based on a new trade model under uncertainty about product quality in which heterogeneous firms can strategically invest in quality signaling. Using French firm-level data, we exploit information on prices and productivity toestimate the quality of exported products. Higher quality is assigned to products supplied by an exporter with higher marginal costs conditional on productivity. In accordance with our theory, quality standards enforced on products by destination countries (i) reduce the export probability of low-quality firms but also that of high-quality low-productivity firms; (ii) increase the export participation and sales of high-productivity high-quality firms; (iii) improve the average quality of consumption goods exported by France.

Suggested Citation

  • Anne-Célia Disdier & Carl Gaigné & Cristina Herghelegiu, 2018. "Do Standards Improve the Quality of Traded Products?," Working Papers ECARES 2018-38, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/279619
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    References listed on IDEAS

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    Cited by:

    1. Traoré, Ousmane Z & Tamini, Lota D., 2020. "The Net Effect of the Technical Non-Tariff Measures in OECD countries on African Exports of Plant Products," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304460, Agricultural and Applied Economics Association.

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    Keywords

    Firm exports; quality standards; information asymmetry; product quality;

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