INTERNATIONAL SPECIALIZATION AND VERTICAL DIFFERENTIATION

Affortunato Francesca (), Mariateresa Ciommi, Furia Donatella () and Vaccaro Enrico ()

Annals of Faculty of Economics, 2010, vol. 1, issue 1, 146-150

Abstract: During the last decades, market segmentation and intra-industry trade have become increasingly relevant. The underlying hypothesis of our work is that distinct articles have heterogeneous potential for vertical differentiation, implying that different patterns of international specialization should be identifiable. We carry out an analysis on revealed comparative advantage (through the Lafay Index) in specific sectors of interest. Then we highlight the emergence of diverse degrees of product quality differentiation among sectors (through the Relative Quality Index). Results confirm our hypothesis. Indeed it appears that only certain goods, for which the pace of either creative or technological innovation (or both) is particularly fast, present a high degree of vertical differentiation and market segmentation. This allows countries to specialize in a particular product variety and gain market power position for that variety. These findings should be taken in due consideration when designing trade policies.

Keywords: International specialization; Lafay Index; Relative Quality Index; creative sectors (search for similar items in EconPapers)
JEL-codes: D4 F1 F59 Z1 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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