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Collective Reputation in Trade: Evidence from the Chinese Dairy Industry

Author

Listed:
  • Jie Bai

    (Harvard Kennedy School)

  • Ludovica Gazze

    (University of Warwick, Department of Economics)

  • Yukun Wang

    (Cornell University, Department of Economics)

Abstract

The existence of collective reputation implies an important externality. Among firms trading internationally, quality shocks about one firm's products could affect the demand of other firms from the same origin country. We study such a reputation spillover in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging detailed firm-product level administrative data and official quality inspection reports, we document sizable reputation spillovers on uncontaminated firms. We further investigate potential mechanisms that could mediate the strength of collective reputation, including information accuracy, observability of the supply chain, and prior export experience.

Suggested Citation

  • Jie Bai & Ludovica Gazze & Yukun Wang, 2022. "Collective Reputation in Trade: Evidence from the Chinese Dairy Industry," The Review of Economics and Statistics, MIT Press, vol. 104(6), pages 1121-1137, November.
    • Handle: RePEc:tpr:restat:v:104:y:2022:i:6:p:1121-1137
    DOI: 10.1162/rest_a_01032
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    Cited by:

    1. Pecchioli, Bruno & Moroz, David, 2023. "Do geographical appellations provide useful quality signals? The case of Scotch single malt whiskies," Economic Modelling, Elsevier, vol. 124(C).
    2. Wenshou Yan & Yan Cai & Xuan Guo, 2023. "How can trade partners be chosen when facing food scandals? China's milk scandal as a natural experiment," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(4), pages 603-635, October.
    3. Lin, Wen & Ma, Baojie & Liang, Jiangyuan & Jin, Shaosheng, 2024. "Price response to government disclosure of food safety information in developing markets," Food Policy, Elsevier, vol. 123(C).
    4. Elisa Navarra, 2022. "Stock Market Response to Firms’ Misconduct," Working Papers ECARES 2022-40, ULB -- Universite Libre de Bruxelles.
    5. Miriam Venturini, 2023. "The Imperfect Union: Labor Racketeering, Corruption Exposure, and Its Consequences," Working Papers 202407, University of California at Riverside, Department of Economics.
    6. Stefano Castriota & Paolo Frumento & Francesco Suppressa, 2024. "Identifying the collective reputation premium: a spatial discontinuity approach," Discussion Papers 2024/310, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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