You are not permitted to access the full text of articles.
If you have any questions about permissions,
please contact the Society.
νμλμ λ Όλ¬Έ μ΄μ© κΆνμ΄ μμ΅λλ€.
κΆν κ΄λ ¨ λ¬Έμλ ννλ‘ λΆν λλ¦½λλ€.
|[ Article ]|
|Seoul Journal of Economics - Vol. 33, No. 2, pp.99-119|
|ISSN: 1225-0279 (Print)|
|Print publication date 30 May 2020|
|Received 04 Jan 2020 Revised 11 Mar 2020 Accepted 19 Mar 2020|
|Trade of Vertically Differentiated Products, Quality Improvement, and Welfare|
Le Duc Niem ; Taegi Kim
|Le Duc Niem, Department of Economics, Tay Nguyen University, 567 Le Duan Buon Ma Thuot, Dak Lak, Vietnam, Tel: +84-96-406-1111, Fax: +84-26-2382-5184 (firstname.lastname@example.org)|
|Taegi Kim, Corresponding Author, Department of Economics, Chonnam National University, 77 Yongbong-ro, Buk-gu, Gwangju, 61186, South Korea, Tel: +82-62-530-1455, Fax: +82-62-530-1549 (email@example.com)|
Funding Information ▼
JEL Classification: F12, L13
This paper constructs a simple model to explain how trade in vertically differentiated products affects the welfare of the trading countries when product quality can be selected by firms. We specifically devise a model showing that when trade expands a market, firms will intensively invest in R&D activities to build higher quality into their goods and thus benefit the entire region. We find that trade does not increase the variety of goods but increases their cost due to their higher quality. We conclude that quality improvement is the main mechanism that helps countries gain from trade in vertically differentiated goods.
|Keywords: Product quality, Variety of goods, Vertical intra-industry trade, Welfare
This research is funded by Vietnam National Foundation for Science and Technology Development (NAFOSTED) under grant number 502.01-2019.330.
|1.||Bhagwati, J. and Davis, D. R. “Intraindustry trade: issues and theory.” Trade, Theory and Econometrics (2012): 23-38.|
|2.||Beloqui, L. and Usategui, J. M. “Vertical Differentiation and Entry Deterrence: A Reconsideration” DFAE-II WP Series 6 (2005): 1.|
|3.||Bergoeing, R. and Kehoe, T. J. Trade theory and trade facts. Federal Reserve Bank of Minneapolis, Research Department (2003).|
|4.||Bloom N., Draca M. and Reenen J. V. “Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity.” The review of economic studies 83 (No. 1 2016): 87-117.
|5.||Brito, R. D., Chami J. and Souza E. C. The quality-cost choice of R&D in the nations’ exports’ (No. wpe_286). Insper Working Paper, Insper Instituto de Ensino e Pesquisa (2012).|
|6.||Davis, D. R. “Intra-industry trade: A Heckscher-Ohlin-Ricardo approach.” Journal of International Economics 39 (Nos. 3-4 1995): 201-226.
|7.||Fabrizio, S., Igan D. and Mody A. “The dynamics of product quality and international competitiveness.” IMF Working Paper (2007): 1-33.
|8.||Falvey, R. E. “Commercial policy and intra-industry trade.” Journal of International Economics 11 (No. 4 1981): 495-511.
|9.||Falvey, R. E. and Kierzkowski H. Product quality, intra-industry trade and (im) perfect competition. (1987)|
|10.||Flam, H. and Helpman E. “Vertical product differentiation and North-South trade.” The American Economic Review (1987): 810-822.|
|11.||Gabrisch, H. and Segnana M. L. (2003). Vertical and horizontal patterns of intra-industry trade between EU and candidate countries. Halle (Saale): IWH (2003).|
|12.||Gabszewicz, J. and Thisse J. Fr. “Price competition, quality and income disparities.” Journal of Economic Theory 20 (No. 3 1979): 340-359.
|13.||Gruber, W. H, Mehta D. and Vernon R. “The R&D factor in international trade and international investment of U.S. industries.” Journal of Political Economy 75 (No. 1 1967): 20-37.
|14.||Krugman, P. R. “Increasing returns, monopolistic competition, and international trade.” Journal of International Economics 9 (No. 4 1979): 469-479.
|15.||Lancaster, K. “Intra-industry trade under perfect monopolistic competition.” Journal of International Economics 10 (No. 2 1980): 151-175.
|16.||Liao, P. C. (2008). “A note on market coverage in vertical differentiation models with fixed costs.” Bulletin of Economic Research 60 (No. 1 2008): 27-44.
|17.||Linder, S. An Essay on Trade and Transformation (1961).|
|18.||Motta, Massimo. “Endogenous quality choice: price vs. quantity competition.” The Journal of Industrial Economics (1993): 113-131.
|19.||Mussa, M. and Sherwin Rosen. “Monopoly and product quality.” Journal of Economic Theory 18 (No. 2 1978): 301-317.
|20.||Nguyen, X. “On the efficiency of private and state-owned enterprises in mixed markets.” Economic Modelling 50 (2015): 345-353.
|21.||Schubert, S. “The low-quality advantage in vertical product differentiation.” Managerial and Decision Economics 38 (No. 7 2017): 923-928.
|22.||Shaked, A. and Sutton, J. “Natural oligopolies” Econometrica: journal of the Economic Society (1983): 1469-1483.
|23.||Sutton, J. “Vertical product differentiation: Some basic themes.” The American Economic Review 76 (No. 2 1986): 393-398.|
|24.||Wauthy, X. “Quality choice in models of vertical differentiation.” The Journal of Industrial Economics (1996): 345-353.
Editorial Office, Seoul Journal of Economics, Institute of Economic Research, Seoul National University 599 Gwanangno, Gwanak-gu, Seoul 151-746, Korea
Tel: +82-2-880-5434 | Fax: +82-2-888-4454 | E-mail: firstname.lastname@example.org
Copyright (c) 2020 SJE. All rights reserved.