UChicago E&E Lab
33 N. LaSalle Street
Chicago, IL 60602
Institutional Affiliation: University of Chicago
NBER Working Papers and Publications
|September 2019||Collective Reputation in Trade: Evidence from the Chinese Dairy Industry|
with Jie Bai, Yukun Wang: w26283
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 this issue in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging rich firm-product level administrative data and official quality inspection reports, we find that the export revenue of contaminated firms dropped by 84% after the scandal, relative to the national industrial trend, and the spillover effect on non-contaminated firms is measured at 64% of the direct effect. Notably, firms deemed innocent by government inspections did not fare any better than noninspected firms. These findings highlight the importance of collective reputati...