Product Quality and the International Location of Manufacturing Industry

Sylvia Gottschalk

Journal of Economic Integration, 2002, vol. 17, 363-376

Abstract: This paper investigates how trade liberalisation affects manufacturing production in the South when consumer perception of product substitutability in North and South is asymmetric. Consumers in the former view foreign goods as poorer substitutes of domestic varieties, while in the latter foreign and domestic varieties are equally substitutable. The main result of our exercise is that asymmetric product substitutability gives firms in the North better access to markets in the South. Local manufacturing production then becomes unsustainable even at positive trade costs, while deepening trade liberalisation usually results in the South specialising in non-industrial production.

Keywords: trade liberalization; north-south trade; asymmetric product substitutability (search for similar items in EconPapers)
JEL-codes: F10 (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0199

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