Does institutional quality matter for export product quality? Evidence from China

Abstract

In this study, we discuss institutional quality and export product quality within a unified framework and explore the influence of institutional quality on product export quality empirically by matching regional-level data, Chinese Industrial Enterprises Database and the China Customs Import and Export Database in the period of 2000–2011. To reflect institutional quality as comprehensively as possible, we construct an index system including six institutional factors: financial service, open-door, government intervention, corruption, property rights protection and judicial fairness. To avoid the loss of information and minimize the endogeneity of reverse causality, we take advantage of microdata of enterprise in regression. The results show that, on average, the improvement of institutional quality has a positive impact on export product quality; Compared with processing trade, export product quality of general trading enterprises is more affected by local institutional quality. Among the various factors of institutional quality, corruption and judicial fairness have the greatest impact on export product quality.