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Economic Development and Trade of Quality Differentiated Goods

Author

Listed:
  • Le Duc Niem

    (Chonnam National University, Tay Nguyen University)

  • Taegi Kim

    (Chonnam National University)

Abstract

In this paper, we investigate the impact of economic development on international trade from a theoretical perspective, which considers qualitydifferentiated products and preference diversity for quality. We model two trading partners, and evaluate the effects of per capita income and technology on trade volume and intra-industry trade. We show that the volume of trade and the share of intra-industry trade increases as per capita income increases. Furthermore, we also demonstrate that the volume of trade is proportional to the level of technology, and that the intra-industry trade share increases as the technology in the two countries become similar. This theoretical model may explain why trade volume and intra-industry trade tend to be higher in rich countries than in poor countries.

Suggested Citation

  • Le Duc Niem & Taegi Kim, 2009. "Economic Development and Trade of Quality Differentiated Goods," Korean Economic Review, Korean Economic Association, vol. 25, pages 367-385.
    • Handle: RePEc:kea:keappr:ker-20091231-25-2-08
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Product Quality; Volume of Trade; Intra-industry Trade; Economic Development; Technology;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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