Income Distribution, Product Quality, and International Trade
The authors develop a framework for studying trade in horizontally and vertically differentiated products. In their model, consumers with heterogeneous incomes and tastes purchase a homogeneous good and make a discrete choice of quality and variety of a differentiated product. The distribution of pr...
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| Other Authors: | , |
| Format: | eBook |
| Language: | English |
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Washington, D.C
The World Bank
2011
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| Online Access: | |
| Collection: | World Bank E-Library Archive - Collection details see MPG.ReNa |
| Summary: | The authors develop a framework for studying trade in horizontally and vertically differentiated products. In their model, consumers with heterogeneous incomes and tastes purchase a homogeneous good and make a discrete choice of quality and variety of a differentiated product. The distribution of preferences generates a nested-logit demand structure such that the fraction of consumers who buy a higher-quality product rises with income. The model features a home-market effect that helps to explain why richer countries export higher-quality goods. It provides a tractable tool for studying the welfare consequences of trade and trade policy for different income groups in an economy |
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| Physical Description: | 43 p |