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Working Paper - Signaling and Quality Upgrading: Evidence from E-commerce Certification in China

Date: 2023-08-16    Source: 


August 2023


Kailin Gao, Miaojie Yu



E-commerce certification can signal a firm's quality, reducing information frictions and incentiviz ing quality upgrading. This paper examines the effect of certification on quality upgrading both econometrically and using a novel dynamic structural model. To this end, we collected data from, one of the world's largest global Business-to-Business platforms, which launched its certification policy, “Gold Supplier,” in 2000. We posit that signaling as a Gold Supplier is more costly for lower-quality firms. Combining data with 2000-2015 Chinese Customs Data, we show that firm export quality increases after becoming a Gold Supplier and the effect is greater for smaller firms. Using the Simulated Method of Moments, we estimate a dynamic structural model that embeds information asymmetry, signaling, and quality upgrading. Counterfactual analysis shows that a 1% reduction in the differential cost of signaling increases total trade by 1.50% and that substantial changes in signaling costs can shift the market equilibrium.


Keywords: Signaling, Quality Upgrading, Certification, E-commerce

JEL codes: F19, F69, L19


Read the paper here:     Signaling and Quality Upgrading - Evidence from E-commerce Certification in Cina 20230815(1).pdf