A Reputation Model of Quality in North-South Trade

Eric Rasmusen ()

No 2007-06, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: 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.

Date: 2007
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