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Trade of quality differentiated goods and import elasticities

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  • Stefano Chiarlone

Abstract

This paper focus on the analysis of import demand functions in presence of quality differentiated products. This issue is more and more relevant because of the strong evidence of such kind of differentiation. Here we first derive individual elasticities, then we aggregate them to the national level without referring to the representative consumer hypothesis. We find that quality reduces reaction to prices without affecting that to income. Interestingly at the national level it seems to emerge that richer country should have imports less reactive to prices. That imply that they could be easily able to move towards high quality-high price production without external balance and competitive problems. The opposite seems to be true for poorer countries. Finally, we show that overlooking quality variables in the estimation generate underestimates of the elasticities to relative prices and to income.

Suggested Citation

  • Stefano Chiarlone, 2000. "Trade of quality differentiated goods and import elasticities," LIUC Papers in Economics 72, Cattaneo University (LIUC).
  • Handle: RePEc:liu:liucec:72
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    Cited by:

    1. Pavel Kadochnikov, 2006. "An Analysis of Import Substitution in Russia after the 1998 Crisis," Research Paper Series, Gaidar Institute for Economic Policy, issue 95, pages 148-148.
    2. Borin, Alessandro & Lamieri, Marco, 2007. "Estimating Product Quality in International Trade," MPRA Paper 14678, University Library of Munich, Germany.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General

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