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Reputation of Quality in International Trade: Evidence from Consumer Product Recalls

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  • Zhong, Jiatong

    (University of Alberta, Department of Economics)

Abstract

This paper examines the impact of exporting countries' reputations for product quality on aggregate trade flows. Using a Bayesian learning model, I construct a measure of exporter reputation in which consumers internalize product recalls as signals of poor quality. Structural estimation of the model finds that reputation is important and especially impactful for toys. The market share elasticity of an exporter's reputation is 2.396 for toys. Improving reputation can increase export value, but reputational change is sluggish. Counterfactual exercises confirm that quality inspection institutions are welfare improving.

Suggested Citation

  • Zhong, Jiatong, 2022. "Reputation of Quality in International Trade: Evidence from Consumer Product Recalls," Working Papers 2022-8, University of Alberta, Department of Economics.
    • Handle: RePEc:ris:albaec:2022_008
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    File URL: https://sites.ualberta.ca/~econwps/2022/wp2022-08.pdf
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    References listed on IDEAS

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    Cited by:

    1. Koenig, Pamina & Poncet, Sandra, 2019. "Social responsibility scandals and trade," World Development, Elsevier, vol. 124(C), pages 1-1.

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    More about this item

    Keywords

    International trade; reputation; Bayesian learning; quality uncertainty; product recalls;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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