Quality and Trade
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.
|Date of creation:||Feb 1991|
|Publication status:||published as Journal of Developmental Economics, June 1997, Vol. 53(1): 1-15.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- repec:sae:niesru:v:111:y::i:1:p:48-61 is not listed on IDEAS
- Grossman, G.M. & Helpman, E., 1989.
"Quality Ladders And Product Cycles,"
152, Princeton, Woodrow Wilson School - Public and International Affairs.
- Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-822, December.
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- A. Daly & D.M.W.N. Hitchens & K. Wagner, 1985. "Productivity, Machinery and Skills in a Sample of British and German Manufacturing Plants," National Institute Economic Review, National Institute of Economic and Social Research, vol. 111(1), pages 48-61, February.
- Nancy L. Stokey, 1991. "Human Capital, Product Quality, and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 587-616.
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