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A Reputation Model of Quality in North-South Trade

  • Eric Rasmusen

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Countries have different comparative advantages in quality. These might be due to technological differences, or to reputation differences of the sort described in Klein & Leffler (1981). Reputation differences are particularly interesting, since good reputations are a form of “social capital” that is amenable to modelling. They can explain why firms in these industries like to export even if the foreign price is no higher than the domestic one, and why governments would like to have large “high- value” sectors.

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File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2007-06-rasmusen.pdf
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2007-06.

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Date of creation: 2007
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Handle: RePEc:iuk:wpaper:2007-06
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  1. Richard H. McAdams & Eric B. Rasmusen, 2004. "Norms in Law and Economics," Working Papers 2004-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  2. Kevin M. Murphy & Andrei Shleifer, 1991. "Quality and Trade," NBER Working Papers 3622, National Bureau of Economic Research, Inc.
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  8. Rasmusen, Eric B & Perri, Timothy J, 2001. "Can High Prices Ensure Product Quality when Buyers Do Not Know the Sellers' Cost?," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 561-67, October.
  9. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
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  16. Falvey, Rodney E, 1989. "Trade, Quality Reputations and Commercial Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 607-22, August.
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  18. Chisik, Richard, 2003. "Export industry policy and reputational comparative advantage," Journal of International Economics, Elsevier, vol. 59(2), pages 423-451, March.
  19. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  20. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
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  23. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
  24. David Hummels & Peter J. Klenow, 2002. "The Variety and Quality of a Nation's Trade," NBER Working Papers 8712, National Bureau of Economic Research, Inc.
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