Reference : Income Effects and Vertical Differentiation in International Trade
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Business & economic sciences : International economics
Income Effects and Vertical Differentiation in International Trade
Picard, Pierre M mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Tampieri, Alessandro [University of Bologna]
[en] Heterogeneous firms ; vertical differentiation ; trade
[en] We analyse a trade model with non-homothetic preferences and different quality ver- sions of each product. Income effects drive the quality composition of consumption, pro- duction and trade flows. We show that a rise in local population fosters local asymmetric specialization in high-quality production and exports while it harms low income groups. By contrast, an increase in local productivity may generate specialization in high quality production, which in turn may trigger an immiserizing growth process. Weaker compa- rative advantages induce firm to move and make a local productivity improvement more likely to increase production of higher quality goods everywhere.
Researchers ; Professionals ; General public

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