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Quality and Trade

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  • Kevin M. Murphy
  • Andrei Shleifer

Abstract

We present a model of trade in which similar countries trade more with each other than very different countries. The reason is that high human capital countries have a comparative advantage at producing high quality goods, but are also rich enough to want to consume high quality. As a result, countries choose trading partners at a similar level of development, who produce similar quality products. The model helps account for the observed trade patterns, and sheds light on international income comparisons. It also helps explain recent concerns of Eastern European countries that they have "nothing to sell" to the West.

Suggested Citation

  • Kevin M. Murphy & Andrei Shleifer, 1991. "Quality and Trade," NBER Working Papers 3622, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3622
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    Other versions of this item:

    • Murphy, Kevin M. & Shleifer, Andrei, 1991. "Quality and Trade," Working Papers 66, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    • Murphy, Kevin M & Shleifer, Andrei, 1997. "Quality and Trade," Scholarly Articles 30722111, Harvard University Department of Economics.

    References listed on IDEAS

    as
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    2. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders and Product Cycles," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 557-586.
    3. James R. Markusen, 2021. "Explaining the Volume of Trade: An Eclectic Approach," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 9, pages 177-186, World Scientific Publishing Co. Pte. Ltd..
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    7. Raymond Vernon, 1970. "The Technology Factor in International Trade," NBER Books, National Bureau of Economic Research, Inc, number vern70-1.
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    10. A. Daly & D.M.W.N. Hitchens & K. Wagner, 1985. "Productivity, Machinery and Skills in a Sample of British and German Manufacturing Plants," National Institute Economic Review, National Institute of Economic and Social Research, vol. 111(1), pages 48-61, February.
    11. Nancy L. Stokey, 1991. "Human Capital, Product Quality, and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 587-616.
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