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International Specialization And Vertical Differentiation

Author

Listed:
  • Affortunato Francesca

    ()

  • Ciommi Mariateresa

    ()

  • Furia Donatella

    ()

  • Vaccaro Enrico

    ()

Abstract

During the last decades, market segmentation and intra-industry trade have become increasingly relevant. The underlying hypothesis of our work is that distinct articles have heterogeneous potential for vertical differentiation, implying that different patterns of international specialization should be identifiable. We carry out an analysis on revealed comparative advantage (through the Lafay Index) in specific sectors of interest. Then we highlight the emergence of diverse degrees of product quality differentiation among sectors (through the Relative Quality Index). Results confirm our hypothesis. Indeed it appears that only certain goods, for which the pace of either creative or technological innovation (or both) is particularly fast, present a high degree of vertical differentiation and market segmentation. This allows countries to specialize in a particular product variety and gain market power position for that variety. These findings should be taken in due consideration when designing trade policies.

Suggested Citation

  • Affortunato Francesca & Ciommi Mariateresa & Furia Donatella & Vaccaro Enrico, 2010. "International Specialization And Vertical Differentiation," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 146-150, July.
  • Handle: RePEc:ora:journl:v:1:y:2010:i:1:p:146-150
    as

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    File URL: http://anale.steconomiceuoradea.ro/volume/2010/n1/022.pdf
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    References listed on IDEAS

    as
    1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    2. Andrew B. Bernard & J. Bradford Jensen, 2001. "Who Dies? International Trade, Market Structure, and Industrial Restructuring," NBER Working Papers 8327, National Bureau of Economic Research, Inc.
    3. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
    4. Ricotta, Fernanda & Mannarino, Lidia & Pupo, Valeria & Succurro, Marianna, 2008. "Export quality in the machinery sector: Some evidence from main competitors," MPRA Paper 12677, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    International specialization; Lafay Index; Relative Quality Index; creative sectors;

    JEL classification:

    • F1 - International Economics - - Trade
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • Z1 - Other Special Topics - - Cultural Economics

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