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Vertical Product Differentiation in International Trade: an Econometric Investigation

Author

Listed:
  • J. Fersterer
  • Michael Landesmann

    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

This paper presents a detailed econometric investigation of vertical product (i.e. quality) differentiation in EU markets. Use is made of trade statistics at the most detailed (8-digit CN) level to analyse the pattern of quality positioning in EU trade (of EU memebers and non-EU countries.) Two different 'quality indicators' are devised one refers to the relative representation of producers in different quality segments in EU markets, the other amounts to the compilation of industry-level price gaps. Evidence is found for dramatic and rather stable hierarchical structures in the product qualities supplied by different national producers. The quality hierarchies are then related to a host of supply-side variables wage rates, productivity levels, industrial research and development spending, exchange rate movements. the econometric analyses supports arather robust explanatory framework relating the quality positioning of national producers to their relative supply-side characteristics.

Suggested Citation

  • J. Fersterer & Michael Landesmann, 1998. "Vertical Product Differentiation in International Trade: an Econometric Investigation," wiiw Working Papers 8, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:8
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    File URL: https://wiiw.ac.at/vertical-product-differentiation-in-international-trade-an-econometric-investigation-dlp-4555.pdf
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    Citations

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    Cited by:

    1. Uwe Dulleck & Neil Foster-McGregor & Robert Stehrer & Julia Wörz, 2004. "Dimensions of Quality Upgrading in CEECs," wiiw Working Papers 29, The Vienna Institute for International Economic Studies, wiiw.
    2. Uwe Dulleck & Neil Foster & Robert stehrer & Julia Wörz, 2003. "Dimensions of quality upgrading - Evidence for CEEC's," Vienna Economics Papers vie0314, University of Vienna, Department of Economics.
    3. Uwe Dulleck & Neil Foster & Robert stehrer & Julia Wörz, 2003. "Dimensions of quality upgrading - Evidence for CEEC´s," Vienna Economics Papers 0314, University of Vienna, Department of Economics.
    4. Uwe Dulleck & Neil Foster & Robert Stehrer & Julia Woerz, 2005. "Dimensions of quality upgrading," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 51-76, January.
    5. Peter Egger & Kurt Kratena, 2003. "A tale of competition between Eastern and Southern Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 114-130, March.

    More about this item

    Keywords

    Vertical product differentation; international trade; quality competition; EU markets;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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