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


  • Basu, Arnab K
  • Chau, Nancy H


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. Copyright 1998 by Blackwell Publishing Ltd

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  • Basu, Arnab K & Chau, Nancy H, 1998. "Asymmetric Country-of-Origin Effects on Intraindustry Trade and the International Quality," Review of Development Economics, Wiley Blackwell, vol. 2(2), pages 140-166, June.
  • Handle: RePEc:bla:rdevec:v:2:y:1998:i:2:p:140-66

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    References listed on IDEAS

    1. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    2. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, vol. 107(441), pages 297-321, March.
    3. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    4. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
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    Cited by:

    1. 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.
    2. Rasmusen, Eric, 2017. "A model of trust in quality and North–South trade," Research in Economics, Elsevier, vol. 71(1), pages 159-170.

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