World Trade Patterns and Prices: The Role of Productivity and Quality Heterogeneity
AbstractThis paper analyzes the role of product quality and labor efficiency in shaping the trade patterns and trade intensities within and across two groups of countries, the developed and richer North and the developing South. Recent empirical literature identifies a positive relation between income per capita and both export and import prices, and also the import prices conditional on exporter. Instead of relying on specific demand side mechanisms such as non-homothetic preferences, we focus on the North-South differences in technology in a four country North-South trade model with two dimensions of firm het- erogeneity. Differences in firms’ product qualities and cost efficiencies result in a price distribution generating different consumption bundles and the observed export and import prices across rich and poor countries. Furthermore, the resulting total expenditure allocation across quality shows that the North (South) spends a larger share of its income on high (low) quality even with the same homothetic preferences across regions.
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Bibliographic InfoPaper provided by National Bank of Serbia in its series Working papers with number 19.
Length: 28 pages
Date of creation: Jul 2011
Date of revision:
Contact details of provider:
Postal: National Bank of Serbia, 12 Kralja Petra St, 11 000 Belgrade, Republic of Serbia
Web page: http://www.nbs.rs
More information through EDIRC
International trade patterns; North-South trade; import and export prices; heterogeneous firms; product quality;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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