Quality-Differentiated Inputs and Trade in Vertically Related Markets

Susan Skeath ()

Review of International Economics, 1995, vol. 3, issue 1, 104-17

Abstract: This paper presents an international trade model of vertically related markets with quality differentiation at the stage of the intermediate good. Domestic input producers are at a disadvantage relative to higher quality foreign suppliers in providing inputs to a domestic final-good producer. The input producer may be driven out of the market unless policies enacted by the domestic government can encourage domestic final-good firms to use the domestic input. Results show that multiple tariffs and direct production subsidies are the most beneficial policy options. Copyright 1995 by Blackwell Publishing Ltd.

Date: 1995
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