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Product Quality and the International Location of Manufacturing Industry


  • Gottschalk, Sylvia D.

    () (University of Sussex)


This paper investigates how trade liberalisation affects manufacturing production in the South when consumer perception of product substitutability in North and South is asymmetric. Consumers in the former view foreign goods as poorer substitutes of domestic varieties, while in the latter foreign and domestic varieties are equally substitutable. The main result of our exercise is that asymmetric product substitutability gives firms in the North better access to markets in the South. Local manufacturing production then becomes unsustainable even at positive trade costs, while deepening trade liberalisation usually results in the South specialising in non-industrial production.

Suggested Citation

  • Gottschalk, Sylvia D., 2002. "Product Quality and the International Location of Manufacturing Industry," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 363-376.
  • Handle: RePEc:ris:integr:0199

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    trade liberalization; north-south trade; asymmetric product substitutability;

    JEL classification:

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


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