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...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111013095506 http://hdl.handle.net/10986/3609 |
| 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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