Trade of quality differentiated goods and import elasticities
AbstractThis paper studies imports of quality products. The issue is more and more relevant because of the strong evidence of such differentiation in international trade. We first derive individual demand, then we aggregate without using the representative consumer hypothesis. We find that quality reduces reaction of imports to prices without affecting reaction to income. At the national level, it emerges that imports of richer country are less reactive to prices. Such countries can easily switch to high quality-high price productions without trade balance and competitive problems. The opposite seems true for poorer countries. Finally, quality causes parameter non-constancies in estimation and overlooking this determinant of imports causes underestimates of elasticities in absolute value.
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Bibliographic InfoPaper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 112.
Length: 14 pages
Date of creation: Jul 2000
Date of revision: Jul 2000
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Other versions of this item:
- Stefano Chiarlone, 2000. "Trade of quality differentiated goods and import elasticities," LIUC Papers in Economics 72, Cattaneo University (LIUC).
- F10 - International Economics - - Trade - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-01-21 (All new papers)
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