Income Distribution, Product Quality, and International Trade
Pablo Fajgelbaum (),
Gene Grossman and
Elhanan Helpman
Scholarly Articles from Harvard University Department of Economics
Abstract:
We develop a framework for studying trade in vertically and horizontally differentiated products. In our model, consumers with heterogeneous incomes and tastes purchase a homogeneous good as well as making a discrete choice of quality and variety of a differentiated product. The distribution of preferences in the population generates a nested logit demand structure. These demands are such that the fraction of consumers who buy a higher-quality product rises with income. We use the model to study the pattern of trade between countries that differ in size and income distributions but are otherwise identical. Trade―which is driven primarily by demand factors―derives from "home market effects" in the presence of transport costs. The model helps to explain why richer countries export higher-quality goods. It provides a tractable tool for studying the welfare consequences of trade, transport costs, and trade policy for different income groups in an economy.
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (320)
Published in Journal of Political Economy
Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/25586659/JPE_662628.pdf (application/pdf)
Related works:
Journal Article: Income Distribution, Product Quality, and International Trade (2011) 
Working Paper: Income Distribution, Product Quality, and International Trade (2011) 
Working Paper: Income distribution, product quality, and international trade (2011) 
Working Paper: Income Distribution, Product Quality, and International Trade (2009) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:25586659
Access Statistics for this paper
More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().