IDEAS home Printed from
   My bibliography  Save this paper

Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences


  • Esteban Jaimovich
  • Vincenzo Merella


The literature on North-South trade has explored conditions under which international trade might magnify income disparities between the advanced North and the backward South. Little attention has yet been placed on the effect of trade on countries that do not display substantial dissimilarities concerning aggregate capital endowments. We show that even when no single country is technologically more advanced than any other one and productivity changes are uniform and identical in all countries, international trade may still be a source of income divergence when nonhomothetic preferences and quality ladders are jointly taken into account. Income divergence will be experienced when comparative advantages induce patterns of specialisation that, although optimal for each country at some initial point in time, do not offer the same scope for improvements in terms of subsequent quality upgrading of final products.

Suggested Citation

  • Esteban Jaimovich & Vincenzo Merella, 2010. "Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences," DEGIT Conference Papers c015_033, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c015_033

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Brooks, Eileen L., 2006. "Why don't firms export more? Product quality and Colombian plants," Journal of Development Economics, Elsevier, vol. 80(1), pages 160-178, June.
    2. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2011. "Income Distribution, Product Quality, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 721-765.
    3. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    4. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1450-1476.
    5. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 417-474.
    6. Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    7. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
    8. Benedetti Fasil, Cristiana & Borota, Teodora, 2013. "World trade patterns and prices: The role of productivity and quality heterogeneity," Journal of International Economics, Elsevier, vol. 91(1), pages 68-81.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Pierre M. Picard & Alessandro Tampieri, 2016. "Income Effects and Vertical Differentiation in International Trade," CREA Discussion Paper Series 16-05, Center for Research in Economic Analysis, University of Luxembourg.
    2. Benedetti Fasil, Cristiana & Borota, Teodora, 2013. "World trade patterns and prices: The role of productivity and quality heterogeneity," Journal of International Economics, Elsevier, vol. 91(1), pages 68-81.
    3. Joachim Stibora & Albert de Vaal, 2015. "Does Preferential Trade Benefit Poor Countries? A General Equilibrium Assessment with Nonhomothetic Preferences," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 239-270, May.
    4. Jaimovich, Esteban & Merella, Vincenzo, 2015. "Love for quality, comparative advantage, and trade," Journal of International Economics, Elsevier, vol. 97(2), pages 376-391.
    5. Vincenzo Merella & Stephen E. Satchell, 2014. "Technology Shocks and Asset Pricing: The Role of Consumer Confidence," Carlo Alberto Notebooks 352, Collegio Carlo Alberto.
    6. Ciani, Andrea, 2017. "Income inequality and the quality of imports," DICE Discussion Papers 245, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    7. Schetter, Ulrich, 2016. "Comparative Advantages with Product Complexity and Product Quality," Annual Conference 2016 (Augsburg): Demographic Change 145933, Verein für Socialpolitik / German Economic Association.
    8. Yilmazkuday, Hakan, 2016. "Constant versus variable markups: Implications for the law of one price," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 154-168.
    9. Vincenzo Merella, 2014. "Do Quality Ladders Rationalise the Observed Engel Curves?," BCAM Working Papers 1401, Birkbeck Centre for Applied Macroeconomics.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c015_033. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Pedersen). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.