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Quality Standards, Industry Structure, and Welfare in a Global Economy

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  • Carl Gaigné
  • Bruno Larue

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," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(5), pages 1432-1449.
    • Handle: RePEc:oup:ajagec:v:98:y:2016:i:5:p:1432-1449.
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    File URL: http://hdl.handle.net/10.1093/ajae/aaw039
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    Cited by:

    1. Anne‐Célia Disdier & Carl Gaigné & Cristina Herghelegiu, 2023. "Do standards improve the quality of traded products?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1238-1290, November.
    2. Macedoni, Luca & Weinberger, Ariel, 2022. "Quality heterogeneity and misallocation: The welfare benefits of raising your standards," Journal of International Economics, Elsevier, vol. 134(C).
    3. Carl Gaigné & Karine Latouche & Stéphane Turolla, 2020. "Compétitivité internationale du secteur agroalimentaire français : c’est quoi le problème ?," Post-Print hal-03346304, HAL.
    4. Akash Kushwah & Rajendra Kumar, 2017. "Haccp - Its Need And Practices," Acta Chemica Malaysia (ACMY), Zibeline International Publishing, vol. 1(2), pages 1-5, January.
    5. Marette Stéphan, 2018. "Illegitimate or Legitimate Non-Tariff Measures," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(2), pages 1-18, November.
    6. Duvaleix, Sabine & Emlinger, Charlotte & Gaigné, Carl & Latouche, Karine, 2021. "Geographical indications and trade: Firm-level evidence from the French cheese industry," Food Policy, Elsevier, vol. 102(C).
    7. 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.
    8. Wendkouni Jean‐Baptiste Zongo & Bruno Larue & Carl Gaigné, 2023. "On export duration puzzles," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(2), pages 453-478, March.
    9. Pavol Durana & Pavol Kral & Vojtech Stehel & George Lazaroiu & Wlodzimierz Sroka, 2019. "Quality Culture of Manufacturing Enterprises: A Possible Way to Adaptation to Industry 4.0," Social Sciences, MDPI, vol. 8(4), pages 1-25, April.
    10. Kari E. R. Heerman & Ian M. Sheldon, 2022. "Sustainable agricultural production, income, and eco‐labeling: What can be learned from a modern Ricardian approach?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(4), pages 1614-1636, December.
    11. Luca Macedoni, 2022. "Asymmetric information, quality, and regulations," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 1180-1198, September.
    12. Luca Macedoni & Ariel Weinberger, 2021. "Quality Misallocation, Trade, and Regulations," CESifo Working Paper Series 9041, CESifo.
    13. Yuqing Zheng & Talia Bar, 2023. "Certifier competition and audit grades: An empirical examination using food safety certification," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(1), pages 182-196, March.
    14. Curzi, Daniele & Schuster, Monica & Maertens, Miet & Olper, Alessandro, 2020. "Standards, trade margins and product quality: Firm-level evidence from Peru," Food Policy, Elsevier, vol. 91(C).
    15. Shingal, Anirudh & Ehrich, Malte, 2024. "The EU’s pesticides MRLs harmonization: effect on trade, prices and quality," Food Policy, Elsevier, vol. 125(C).
    16. Dela-Dem Doe Fiankor & Daniele Curzi & Alessandro Olper, 2021. "Trade, price and quality upgrading effects of agri-food standards [Endogenous Trade Policy with Heterogeneous Firms]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 835-877.

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