The Role of Trademarks in International Trade: Evidence from Chinese Exporters in the African Tyre Industry

About this event

Since the fact that reliable quality of goods and services cannot be provided has been a great concern in developing countries, how to allow sellers to upgrade their quality has been debated in terms of a public policy among policymakers in recent years, and a trademark has been considered as a key targeting policy. This research provides evidence of how a trademark actually works in a developing country. We focus on a Chinese exporter in an African tyre industry and exploit a sudden change of the member countries ratifying an agreement of an international trademark for our empirical analyses. At an extensive margin, a Chinese exporter decreases the probability of its export to the ratifying countries. At an intensive margin, an exporter is more likely to use a trademark. The effect on other measures depends on whether or not a firm has its own trademark. Without a trademark, the firm decreases its quantity and revenue. On the other hand, the one with a trademark increases its unit price, quantity, quality and revenue. The back-of-the-envelope calculation implies that this international trademark agreement contributes to welfare increase to some extent in the ratifying African countries.