Trade in agricultural and food products

Sustainable agricultural production, income, and eco‐labeling: What can be learned from a modern Ricardian approach?

“…Third, finding a more appropriate and tractable way of capturing non‐homothetic preferences is critical, especially if the model is to be tied more closely to the existing literature on vertical product differentiation, that is, one that predicts, with increasing incomes, consumers substitute away from unsustainable products (low‐quality) toward sustainable products (high‐quality). While Gaigné and Gouel (forthcoming 2022) have a useful discussion relating to the issue of non‐homotheticity and why it matters in thinking about agricultural trade, they conclude it is an open question on how to relate increasing incomes to consumption of higher‐quality products.…”

“…Considerable progress has been made in incorporating vertical product differentiation into trade models; for example, see Amiti and Khandelwal (2013), Baldwin and Harrigan (2011), Crinò and Epifani (2012), Curzi et al (2015), Eum et al (2021), Gaigné and Larue (2016), and Kugler and Verhoogen (2012). As noted by Gaigné and Gouel (forthcoming 2022) the international economics literature typically assumes away information failure: consumers are unable to verify claimed environmental or other benefits of how a product was produced both before and after consumption, such claims being termed credence attributes of the product (Dulleck & Kerschbamer, 2006). Eco‐labeling in conjunction with a mechanism for certification of environmental/sustainability claims is regarded as key in resolving this type of information asymmetry (Roe & Sheldon, 2007; Sheldon, 2017; Sheldon & Roe, 2009).…”

Product innovation and export strategy

“…This present work also builds on the literature that seeks to highlight the role of quality in international trade. Concerning the relation between quality and trade, several authors analyse the role of vertical differentiation in trade models based on Melitz (2003)'s model (for more detail, see Gaigné and Gouel, 2022). For instance, Kugler and Verhoogen (2012) explain why larger firms specialise in higher-quality products and pay higher prices for inputs.…”

Do standards improve the quality of traded products?

“…This paper also pursues investigations on the link between product quality and trade at the firm level. Building on Melitz (2003)'s framework, several papers consider vertical differentiation to explain the quality sorting found in international trade (see Gaigné and Gouel 2022, for a survey of the theoretical literature on quality sorting). However, all these papers assume perfect information.…”