The Impact of Media on Trade: Evidence from the 2008 China Milk Contamination Scandal
Title:
The Impact of Media on Trade: Evidence from the 2008 China Milk Contamination Scandal
Author(s):
Ce (Matthew) Shi, Tuan Anh Luong, Zheng Wang
Year of Publishing:
2022
Publisher:
Working Paper
Abstract:

We provide the first quantified evidence on the impact of the media on consumers' evaluation of product quality and their welfare in international trade. Our estimation is based on an exploration of the changes in the global dairy product trade following the Chinese milk contamination scandal in 2008. Using a discrete choice model of consumer demand and a quadruple-difference research design, we find that, on average, a one-standard-deviation increase in media exposure to the scandal caused an at least a US$4 equivalent decrease in the perceived quality of Chinese milk. Further counterfactual simulation that takes into account the strategic responses of products suggests that consumer welfare dropped by nearly 10\% in affected markets after the scandal. Our results shed light on the role of information in international trade from a demand-side perspective.

More Research From These Scholars

Zheng Song, Michael Koenig, Kjetil Storesletten, Fabrizio Zilibotti,

We construct an endogenous growth model with random interactions where firms are subject to distortions. The TFP distribution evolves endogenously as firms seek to upgrade their technology over time either by innovating or by imitating other firms....

Hao Geng, Ce (Matthew) Shi, Zheng Song,

This report employs detailed transaction records from AlipayHK to evaluate the effectiveness of the 2021 Hong Kong Consumption Voucher scheme. We use a difference-in-differences (DID) design that compares the change in the spending of the voucher recipients...