 Love for quality, comparative advantage, and tradeEsteban Jaimovich and Vincenzo Merella Journal of International Economics, 2015, vol. 97, issue 2, 376-391 Abstract: We propose a Ricardian trade model with horizontal and vertical differentiation, where willingness to pay for quality rises with income, and productivity differentials across countries are stronger for high-quality varieties of goods. Our theory predicts that the scope for trade widens and international specialisation intensifies as incomes grow and wealthier consumers raise the quality of their consumption baskets. This implies that comparative advantages strengthen gradually over the path of development as a by-product of the process of quality upgrading. The evolution of comparative advantages leads to specific trade patterns that change over the growth path, by linking richer importers to more specialised exporters. We provide empirical support for this prediction, showing that the share of imports originating from exporters exhibiting a comparative advantage in a specific product correlates positively with the importer's GDP per head. Keywords: International trade; Nonhomothetic preferences; Quality ladders (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:97:y:2015:i:2:p:376-391 DOI: 10.1016/j.jinteco.2015.06.004 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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