Comparative Advantages with Product Complexity and Product Quality
VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association
We analyze the interplay between product-intrinsic complexity and endogenously chosen product quality in international trade. Our work reveals a novel mecha-nism that can explain a rich set of empirical observations: (1) how specialization within products on quality can equalize comparative advantages across products,(2) why poor countries do not export a broad range of products nonetheless, and (3) why the share of products for which this is the case tends to be decreasing over time. Our theory motivates the use of a censored regression model to esti-mate the link between a country’s GDP per capita and the quality of its exports. Following this empirical strategy, we find a much stronger relationship than when using OLS, in line with our theory.
JEL-codes: F11 F14 F19 (search for similar items in EconPapers)
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