Reference : Trade and Vertical Differentiation
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Business & economic sciences : International economics
Trade and Vertical Differentiation
Picard, Pierre M mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Tampieri, Alessandro mailto []
[en] trade ; production quality ; vertical differentiation
[en] This paper discusses a trade model with many countries, many goods produced in multiple quality versions, and non-homothetic preferences. It embeds in the same model a series of results that have been empirically confirmed: high-income countries specialize in the production of high-quality goods and trade more of those. Richer countries purchase more high-quality varieties. They import more high-quality products from the most productive exporters. The paper then studies the impact of productivity and population changes on the quality composition of exports. It finally explains why countries import higher quality goods from more distant countries.

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