Judicial Quality, Input Customisation, and Trade Margins: The Role of Product Quality

Xiaomin  Cui; Miaojie Yu; Rui Zhang

doi:10.1093/ej/ueab098

Judicial Quality, Input Customisation, and Trade Margins: The Role of Product Quality

Xiaomin Cui^*, Miaojie Yu^*, Rui Zhang^*

^*Corresponding author af dette arbejde

Institut for Økonomi - Research Centre for Firms and INdustry Dynamics

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avis › Tidsskriftartikel › Forskning › peer review

2 Citationer (Scopus)

Abstract

We study how the contracting environment affects the quality of trade. A better contracting environment not only induces specialisations in industries intensively using customised inputs, but also causes quality upgrading of domestic varieties and tougher competition in these industries. We incorporate these effects into a Ricardian model with customised input and product quality. Our model predicts that better judicial quality raises a country’s import prices and quality more in contract-intensive products, but has no impacts on its export prices or quality. We empirically confirm these predictions, and find that rising judicial quality is associated with increasing specialisations in contract-intensive industries.

Originalsprog	Engelsk
Tidsskrift	Economic Journal
Vol/bind	132
Nummer	643
Sider (fra-til)	926-952
Antal sider	27
ISSN	0013-0133
DOI	https://doi.org/10.1093/ej/ueab098
Status	Udgivet - 1 apr. 2022

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T2 - The Role of Product Quality

AU - Cui, Xiaomin

AU - Yu, Miaojie

AU - Zhang, Rui

PY - 2022/4/1

Y1 - 2022/4/1

N2 - We study how the contracting environment affects the quality of trade. A better contracting environment not only induces specialisations in industries intensively using customised inputs, but also causes quality upgrading of domestic varieties and tougher competition in these industries. We incorporate these effects into a Ricardian model with customised input and product quality. Our model predicts that better judicial quality raises a country’s import prices and quality more in contract-intensive products, but has no impacts on its export prices or quality. We empirically confirm these predictions, and find that rising judicial quality is associated with increasing specialisations in contract-intensive industries.

AB - We study how the contracting environment affects the quality of trade. A better contracting environment not only induces specialisations in industries intensively using customised inputs, but also causes quality upgrading of domestic varieties and tougher competition in these industries. We incorporate these effects into a Ricardian model with customised input and product quality. Our model predicts that better judicial quality raises a country’s import prices and quality more in contract-intensive products, but has no impacts on its export prices or quality. We empirically confirm these predictions, and find that rising judicial quality is associated with increasing specialisations in contract-intensive industries.

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KW - contracts

KW - customised input

KW - quality

KW - trade margins

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JO - Economic Journal

JF - Economic Journal

IS - 643

ER -

Judicial Quality, Input Customisation, and Trade Margins: The Role of Product Quality

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