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Asymmetric Country‐of‐Origin Effects on Intraindustry Trade and the International Quality Race

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  • Arnab K. Basu
  • Nancy Chau

Abstract

A model of North–South intraindustry trade in quality differentiated products is proposed to examine the role of country‐of‐origin reputation in determining the competitive edge of emerging industries. It is shown that if consumers rationally harbor negative expectations about the quality of Southern products, economic progress in either the North or the South shifts the terms of trade against Southern exports, and worsens Southern producers' incentive to produce high‐quality products. In addition, the paper illustrates the role of income redistributive policies in shifting consumer's demand in favor of Southern high‐quality products.

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  • Arnab K. Basu & Nancy Chau, 1998. "Asymmetric Country‐of‐Origin Effects on Intraindustry Trade and the International Quality Race," Review of Development Economics, Wiley Blackwell, vol. 2(2), pages 140-166, June.
    • Handle: RePEc:bla:rdevec:v:2:y:1998:i:2:p:140-166
    DOI: 10.1111/1467-9361.00034
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    Cited by:

    1. Andrea Moro & Peter Norman, 2019. "Endogenous Comparative Advantage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1088-1124, July.
    2. Basu, Arnab K. & Chau, Nancy H. & Grote, Ulrike, 2004. "On export rivalry and the greening of agriculture--the role of eco-labels," Agricultural Economics, Blackwell, vol. 31(2-3), pages 135-147, December.

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