Institutional Quality, Agglomeration, and Export Product Quality: Evidence From China

Yibei Guo, Baomin Dong and Xiaotian Hu

Review of International Economics, 2025, vol. 33, issue 3, 694-710

Abstract: This study assesses the direct effect of institutional quality on export product quality and the indirect effect through industry agglomeration. Using court trial handling efficiency to measure local institutional quality and a novel instrumental variable based on city commercial chamber hearings of the 1910s, we find that stronger local institutions bolster firms' export product quality directly and facilitate industry agglomeration, indirectly contributing to the enhancement of product quality. The direct and indirect effects are significantly heterogeneous across industries whose patent and contract intensities vary. Our findings shed new light on the consequences of local institutional environments and firms' export behavior, highlighting the importance of agglomeration in the competitive stance of exporters in international markets.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:33:y:2025:i:3:p:694-710

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