Product quality, institutional quality, and market globalization

Masatoshi Tsumagari

Journal of Economic Behavior & Organization, 2025, vol. 236, issue C

Abstract: This paper theoretically examines how market integration, especially globalization, affects average product quality and country welfare. Using a market model in which consumers do not observe product quality and institutions help eliminate inferior quality goods from markets, I show that the effect of market integration significantly depends on institutional quality. Globalization may have a negative effect on a country’s welfare when making progress without harmonized institutional development, and may also expand the size of government, thus increasing the cost of sustaining high institutional quality.

Keywords: Institutional quality; Product quality; Globalization; Adverse selection (search for similar items in EconPapers)
JEL-codes: D82 F61 L15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:236:y:2025:i:c:s0167268125002082

DOI: 10.1016/j.jebo.2025.107089

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