Love for quality, comparative advantage, and trade
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Jaimovich, E and Merella, V (2015) Love for quality, comparative advantage, and trade Journal of International Economics. (In Press)
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Official URL: http://dx.doi.org/10.1016/j.jinteco.2015.06.004
Abstract
© 2015 Elsevier B.V. We propose a Ricardian trade model with horizontal and vertical differentiation, where willingness to pay for quality rises with income, and productivity differentials across countries are stronger for high-quality varieties of goods. Our theory predicts that the scope for trade widens and international specialisation intensifies as incomes grow and wealthier consumers raise the quality of their consumption baskets. This implies that comparative advantages strengthen gradually over the path of development as a by-product of the process of quality upgrading. The evolution of comparative advantages leads to specific trade patterns that change over the growth path, by linking richer importers to more specialised exporters. We provide empirical support for this prediction, showing that the share of imports originating from exporters exhibiting a comparative advantage in a specific product correlates positively with the importer's GDP per head.
| Item Type: | Article | |||||||||
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| Divisions : | Faculty of Arts and Social Sciences > School of Economics | |||||||||
| Authors : |
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| Date : | 9 July 2015 | |||||||||
| Identification Number : | https://doi.org/10.1016/j.jinteco.2015.06.004 | |||||||||
| Additional Information : | © 2015. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ | |||||||||
| Depositing User : | Symplectic Elements | |||||||||
| Date Deposited : | 01 Dec 2015 16:53 | |||||||||
| Last Modified : | 09 Jan 2017 02:08 | |||||||||
| URI: | http://epubs.surrey.ac.uk/id/eprint/809087 |
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