The paper titled with "Judicial Quality, Input Customisation, and Trade Margins: The Role of Product Quality”by Professor YU Miaojie and alumni CUI Xiaomin and ZHANG Rui has been accepted by "Economic Journal", one of the top journals in economics.
Professor YU Miaojie is Peking University Liberal-Arts Chair Professor and Deputy Dean of National School of Development (NSD), Peking University. He is a Cheung-Kong Scholar of Ministry of Education of China, and is awarded as China's National Science Fund for Distinguished Young Scholars. Dr. CUI Xiaomin graduated from the NSD in 2017 with a PhD in Economics (Supervisor: Prof. YU Miaojie), and is currently a Senior Research Fellow at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences. Dr. ZHANG Rui was awarded a PhD Degree in Economics by the NSD in 2019 (Supervisor: Prof. YU Miaojie), and his current position is the Assistant Professor of the FIND Centre of Aarhus University in Denmark.
Abstract: We study how the contracting environment affects the quality of trade. A better contracting environment not only induces specialisations in industries intensively using customised inputs, but also causes quality upgrading of domestic varieties and tougher competition in these industries. We incorporate these effects into a Ricardian model with customised input and product quality. Our model predicts that better judicial quality raises a country’s import prices and quality more in contract-intensive products, but has no impacts on its export prices or quality. We empirically confirm these predictions, and find that rising judicial quality is associated with increasing specialisations in contract-intensive industries.