This paper studies trademarks in developing countries. I introduce a trademark as a signalling device used to mitigate information frictions in a general equilibrium setting with firm heterogeneity. In my model, highly productive firms are more likely to use a trademark since the revenue increase outweighs the trademark cost only for these firms. This induces reallocation away from less productive firms. I test my predictions using Chinese exports to Africa in the tyre industry. I exploit a sudden change in the member countries ratifying an international trademark agreement. My empirical findings support my predictions. At the extensive margin, a Chinese exporter decreases the probability of exporting to the ratifying countries. On the intensive margin, a large exporter earns more by using a trademark while a small exporter does not use a trademark and its market size shrinks. A back-of-the-envelope calculation suggests welfare increases by 0.19% in Africa from the use of trademarks in the ratifying countries' tyre industries.

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Dr Rocco Macchiavello
Professor Oriana Bandiera
Professor Robin Burgess
Dr Catherine Thomas

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