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Quality standards, industry structure and welfare in a global economy

Author

Listed:
  • Carl Gaigné

    () (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST)

  • Bruno Larue

    (Department of Agricultural Economics and Consumer Studies - Université Laval)

Abstract

We study the impact that mimimum quality standards have on industry structure, trade, and welfare when firms can develop their own private standard with a higher quality than the public standard. We introduce vertical differentiation in a firm-based trade model in which firms differ in terms of their productivity and non-cooperatively select the quality and price of their product. A higher public standard increases prices set by constrained and unconstrained firms, but the effect on firms’ output is generally ambiguous for both types of firms. The most productive firms raise their private standard and enjoy higher profits at the expense of less productive firms. A public standard can increase welfare, especially when there is a high concentration of low productivity domestic firms because of a better allocation of resources.

Suggested Citation

  • Carl Gaigné & Bruno Larue, 2016. "Quality standards, industry structure and welfare in a global economy," Post-Print hal-01574927, HAL.
  • Handle: RePEc:hal:journl:hal-01574927
    DOI: 10.1093/ajae/aaw039
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01574927
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    1. repec:zib:zbacmy:v:1:y:2017:i:2:p:1-5 is not listed on IDEAS
    2. Zheng, Yuqing & Bar, Talia, 2017. "Audit Grades in Food Safety Certification," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252714, Southern Agricultural Economics Association.
    3. repec:gam:jscscx:v:8:y:2019:i:4:p:124-:d:224410 is not listed on IDEAS

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