Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-22T23:34:59.108Z Has data issue: false hasContentIssue false
  • English
  • Français

Quality choice and specialization in North-South trade

Published online by Cambridge University Press:  17 August 2016

Luca Lambertini  and
Gianpaolo Rossini
Luca Lambertini
Affiliation:
Università degli Studi di Bologna
Gianpaolo Rossini
Affiliation:
Università degli Studi di Bologna
Get access

Summary

We analyse trade in vertically differentiated goods between a rich and a poor country. In autarky two monopolists, selling a single product, operate in two countries which differ only for their per capita income. If trade opens, the firm operating in the poor country exports to the rich, giving rise to one-way trade. Cconsumers of the rich country and the firm of the poor country benefit from trade. Liberalization may hurt the consumers in the poor country if their per capita income is quite low vis à vis the one of the rich country. Trade in vertically differentiated goods brings about an overall gain if countries are quite far apart in terms of standard of living. Real wages increase in both countries as a result of trade, but relatively more in the rich country. As a remedy to the trade deficit, the rich country may set an import reducing tariff that, only under certain conditions, may benefit also the firm of the poor country and increase total welfare.

Résumé

Résumé

Nous analysons le commerce de biens verticalement différenciés entre un pays riche et un pays pauvre. En autarcie, on aurait deux monopolistes qui vendent un seul produit mais qui opèrent dans des pays qui ne diffèrent que par leur revenu pro capita. Si on ouvre les frontières, la firme du pays pauvre exportera vers le pays riche (et pas l'inverse). Les consommateurs du pays riche et la firme du pays pauvre en bénéficieront. La libéralisation peut nuire aux consommateurs du pays pauvre si leur revenu pro capita est relativement bas par rapport à celui du pays riche. Le commerce de biens verticalement différenciés apporterait un gain général si les consommateurs ont un niveau de vie assez différentes. Les salaires réels augmentent dans les deux pays suite au commerce, mais relativement plus dans le pays riche. Un tarif d'importation peut réduire le déficit commercial et peut sous certaines conditions également profiter à la firme et au bien-être total du pays pauvre.

Keywords

F12F13F12F13
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 64 , Issue 4 , 1998 , pp. 383 - 406
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1998 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

We thank two anonymous referees for helpful comments and suggestions. The usual disclaimer applies. We acknowledge the financial support by MURST under the 60% scheme at the University of Bologna.

References

Corden, W.M. [1971], The Theory of Protection, Oxford, Oxford University Press.Google Scholar
Cremer, H. & Thisse, J.-F. [1994], Commodity taxation in a differentiated oligopoly, International Economic Review, 35(3), pp. 613–33.Google Scholar
Davidson, C. [1984], Cartel stability and tariff policy, Journal of International Economics, 17, pp. 219–37.Google Scholar
Falvey, R. [1981], Commercial policy and intra-industry trade, Journal of International Economics, 11, pp. 495–511.Google Scholar
Falvey, R. & Kierzkowski, H. [1987], Product quality, intra-industry trade and (im)perfect competition, in Kierzkowski, H. (ed.), Protection and Competition in International Trade: Essays in Honour of W.M. Corden, Oxford, Blackwell.Google Scholar
Flam, H. & Helpman, E. [1987], Vertical product differentiation and north-south trade, American Economic Review, 77(5), pp. 810–22.Google Scholar
Greenaway, D., Hine, B. & Milner, C. [1994], Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK, Weltwirtschaftliches Archiv, 130, pp. 77–100.Google Scholar
Greenaway, D., Hine, B. & Milner, C. [1995], Vertical and horizontal intra-industry trade. A cross industry analysis for thè United Kingdom, Economic Journal, 105(433), pp. 1505–1519.Google Scholar
Havrylyshyn, O. & Civan, E. [1985], Intra-industry trade among developing countries, Journal of Development Economics, 18, pp. 253–271.Google Scholar
Helpman, E. [1981], International trade in the presence of product differentiation, economies of scale and monopolistic competition. A Chamberlin-Heckscher-Ohlin approach, Journal of International Economics, 11, pp. 304–40.Google Scholar
Krishna, K. [1987], Tariffs vs quotas with endogenous quality, Journal of International Economics, 23, pp. 97–122.Google Scholar
Krishna, K. [1990], Protection and the product line: Monopoly and product quality, International Economic Review, 31(1), pp. 87–102.Google Scholar
Krugman, P. [1979], Increasing returns, monopolistic competition and international trade, Journal of International Economics, 9, pp. 469–479.Google Scholar
Krugman, P. [1995], Growing trade: causes and consequences, Brookings Papers on Economic Activity, 25th anniversary issue, pp. 327–363.Google Scholar
Lambertini, L. [1993], Vertical product differentiation: Some more general results, Working Paper n° 162, Department of Economics, University of Bologna.Google Scholar
Lambertini, L. [1997], Intraindustry trade under vertical product differentiation, Keio Economic Studies, forthcoming.Google Scholar
Linder, S. [1961], An Essay on Trade and Trans fromation, New York, Wiley.Google Scholar
Motta, M. [1992], Sunk costs and trade liberalization, Economic Journal, 102(412), pp. 578–587.Google Scholar
Motta, M. [1994], International trade and investments in a vertically differentiated industry, International Journal of Industrial Organization, 12, pp. 179–196.Google Scholar
Motta, M., Thisse, J.-F. & Cabrales, A. [1997], On the persistence of leadership or leapfrogging in international trade, International Economic Review, 38(4), pp. 809–824.Google Scholar
Mussa, M. & Rosen, S. [1978], Monopoly and product quality, Journal of Economic Theory, 18, pp. 301–317.Google Scholar
Rotemberg, J. & Saloner, G. [1989], Tariffs vs quotas with implicit collusion, Canadian Journal of Economics, 22, pp. 237–244.Google Scholar
Shaked, A. & Sutton, J. [1982], Relaxing price competition through product differentiation, Review of Economic Studies, 49, pp. 3–13.Google Scholar
Shaked, A. & Sutton, J. [1983], Natural oligopolies, Econometrica, 51, pp. 1469–1483.Google Scholar
Shaked, A. & Sutton, J. [1984], Natural oligopolies and international trade, in Kierzkowskl, H. (ed.), Monopolistic Competition and International Trade, Oxford, Clarendon.Google Scholar
Spence, M. [1975], Monopoly, quality and regulation, Bell Journal of Economics, 6, pp. 417–429.Google Scholar
Tharakan, M. [1984], Intra-industry trade between industrial countries and the developing world, European Economic Review, 26, pp. 213–227.Google Scholar
Tharakan, M. & Kerstens, B. [1995], Does north-south horizontal intra-industry trade really exist? An analysis of the toy industry, Weltwirtschaftliches Archiv, 131, pp. 86–105.Google Scholar
Thararan, M., Kerstens, B. & Glejser, H. [1994], The puzzle of horizontal intra-industry trade between North and South, SPES working paper, University of Antwerp.Google Scholar
Torstensson, J. [1996], Determinants of intra-industry trade: A sensitivity analysis, Oxford Bulletin of Economics and Statistics, 58(3), pp. 507–524.Google Scholar
Wood, A. [1994], North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World, Oxford, Clarendon Press.Google Scholar