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Dumping in a Global World: Why Product Quality Matters

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  • José Luis Moraga‐González
  • Jean‐Marie Viaene

Abstract

Anti‐dumping actions are now the trade policy of choice of developing and transition economies. To understand why these economies have increasingly applied anti‐dumping laws, we build a simple theoretical model of vertical intra‐industry trade and investigate the strategic incentives of exporting firms to undertake dumping. We show that the definition of dumping matters. Based on a comparison of low‐quality and high‐quality prices, only unilateral dumping by the low‐quality firm obtains. By contrast, the standard WTO definition leads to either reciprocal or unilateral dumping by the high‐quality firm, depending on cross‐country differences in incomes, the height of tariff protection and on exchange rate changes.

Suggested Citation

  • José Luis Moraga‐González & Jean‐Marie Viaene, 2005. "Dumping in a Global World: Why Product Quality Matters," The World Economy, Wiley Blackwell, vol. 28(5), pages 669-682, May.
    • Handle: RePEc:bla:worlde:v:28:y:2005:i:5:p:669-682
    DOI: 10.1111/j.1467-9701.2005.00699.x
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    Cited by:

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    2. Jørgen Hansen & Jørgen Nielsen, 2009. "Dumping and Injury Margins in Markets with Horizontal as well as Vertical Product Differentiation," Journal of Industry, Competition and Trade, Springer, vol. 9(3), pages 233-250, September.

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