Income distribution, product quality, and international trade

Pablo Fajgelbaum (), Gene Grossman and Elhanan Helpman

No 5843, Policy Research Working Paper Series from The World Bank

Abstract: The authors develop a framework for studying trade in horizontally and vertically differentiated products. In their model, consumers with heterogeneous incomes and tastes purchase a homogeneous good and make a discrete choice of quality and variety of a differentiated product. The distribution of preferences generates a nested-logit demand structure such that the fraction of consumers who buy a higher-quality product rises with income. The model features a home-market effect that helps to explain why richer countries export higher-quality goods. It provides a tractable tool for studying the welfare consequences of trade and trade policy for different income groups in an economy.

Keywords: Economic Theory&Research; Transport Economics Policy&Planning; Markets and Market Access; Transport and Trade Logistics; Common Carriers Industry (search for similar items in EconPapers)
Date: 2011-10-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (316)

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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)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:5843

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