Do standards improve the quality of traded products?

Abstract

AbstractWe examine whether standards raise the quality of traded products. Matching a panel of French firm–product–destination export data with a data set on sanitary and phytosanitary measures and technical barriers to trade, we find that such quality standards enforced on products by destination countries: (i) favour the export probability of high‐quality firms provided that their productivity is high enough, (ii) raise the export sales of high‐productivity, high‐quality firms at the expense of low‐productivity and low‐quality firms and (iii) increase the quality supplied by firms if their productivity is high enough. We then develop a simple new trade model under uncertainty about product quality in which heterogeneous firms can strategically invest in quality signalling to rationalize these empirical results on quality and selection effects.