Product quality in former centrally planned EU countries

Merella, Vincenzo

;Taušer, Josef

2022-01-01

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Abstract

In the last two decades, initiatives promoted by the media and national public officials of several European former centrally planned (FCP) countries have induced the EU to produce inquiries, reports, and directives regarding productsí price and quality differentials between FCP and non-FCP markets. From a theoretical standpoint, the FCP countriesí concern involves market segmentation and pricing-to-market. We investigate this issue empirically by examining custom data. We find that such differentials exist and can be rationalized by standard international trade theories. In particular, analogous evidence obtains by inspecting intra-EU trade and when the analysis is extended to exporters worldwide, showing that the matter is global and does not pertain solely to EU producers. Therefore, our findings suggest that the FCP countriesí concerns may be unwarranted.