Mutual Recognition of Geographical Indications Between China and the <scp>EU</scp> and Enterprises' Price Mark–Up: Theoretical Mechanisms and Empirical Facts

ABSTRACT This study uses enterprise price mark‐up to comprehensively investigate the net value of the positive spillover and negative competition effects associated with mutual recognition of geographical indications to export enterprises and constructs a price mark‐up model. Utilising data from Chinese listed companies and Chinese Customs from 2007 to 2016, it empirically examines the effect and mechanism of mutual geographical indication (GI) recognition between China and the EU on the price mark‐up of exported agricultural products using a multiple time point difference‐in‐differences model. The relevant results are fourfold. (1) Mutual GI recognition between China and the EU increases enterprises' price mark‐up of exported agricultural products. (2) Regarding mechanisms, the effect of mutual GI recognition on enterprises' price mark‐up of exported agricultural products reveals positive quality‐upgrading spillover effects and efficiency enhancement in addition to negative market competition and cost increase effects. (3) A heterogeneity analysis demonstrates that the positive effect of mutual GI recognition on enterprises' price mark‐up of exported agricultural products is greater for enterprises exporting primary agricultural products, core products and exported to EU countries. This is attributed to such enterprises having stronger cost‐shifting and factor‐adjustment capabilities. (4) Mutual GI recognition is also found to reduce the dispersion of firms' price mark‐ups and significantly improve resource allocation efficiency. Based on GTAP simulations, expanding China‐EU mutual recognition of GIs through a targeted strategy is projected to sustainably increase Chinese agricultural exporters' price mark‐ups by 1.6730 percentage points and their net profit by 5.7670%.