Quality Differentiation, Comparative Advantage, and International Specialization Across Products

Ulrich Schetter

No 126a, CID Working Papers from Center for International Development at Harvard University

Abstract: We introduce quality differentiation into a Ricardian model of international trade. We show that (1) quality differentiation allows industrialized countries to be active across the full board of products, complex and simple ones, while developing countries systematically specialize in simple products, in line with novel stylized facts. (2) Quality differentiation may thus help to explain why richer countries tend to be more diversified and why, increasingly over time, rich and poor countries tend to export the same products. (3) Quality differentiation implies that the gains from inter-product trade mostly accrue to developing countries. (4) Guided by our theory, we use a censored regression model to estimate the link between a country’s GDP per capita and its export quality. We find a much stronger relationship than when using OLS, in line with our theory.

Keywords: Comparative Advantage; Export Diversification; Nestedness; Product Complexity; Quality Differentiation (search for similar items in EconPapers)
JEL-codes: F10 F11 F14 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-int and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Quality differentiation, comparative advantage, and international specialization across products (2024)
Working Paper: Quality Differentiation, Comparative Advantage, and International Specialization Across Products (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cid:wpfacu:126a

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