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

Xiaomin Cui*, Miaojie Yu*, Rui Zhang*

*Corresponding author for this work

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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.
Original languageEnglish
JournalEconomic Journal
Volume132
Issue643
Pages (from-to)926-952
Number of pages27
ISSN0013-0133
DOIs
Publication statusPublished - Apr 2022

Keywords

  • judicial quality
  • contracts
  • customised input
  • quality
  • trade margins

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