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Quality and Trade

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  • Murphy, Kevin M
  • Shleifer, Andrei

Abstract

We present a model of trade in which similar countries trade more with each other than very different countries. The reason is that high human capital countries have a comparative advantage at producing high quality goods, but are also rich enough to want to consume high quality. As a result, countries choose trading partners at a similar level of development, who produce similar quality products. The model helps account for the observed trade patterns, and sheds light on international income comparisons. It also helps explain recent concerns of Eastern European countries that they have "nothing to sell" to the West.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Murphy, Kevin M & Shleifer, Andrei, 1997. "Quality and Trade," Scholarly Articles 30722111, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:30722111
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    File URL: http://dash.harvard.edu/bitstream/handle/1/30722111/66.pdf
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    Other versions of this item:

    • Murphy, Kevin M. & Shleifer, Andrei, 1991. "Quality and Trade," Working Papers 66, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    • Kevin M. Murphy & Andrei Shleifer, 1991. "Quality and Trade," NBER Working Papers 3622, National Bureau of Economic Research, Inc.

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