Asymmetric Country-of-Origin Effects on Intraindustry Trade and the International Quality Race

27 Pages Posted: 30 Dec 2003

See all articles by Arnab K. Basu

Arnab K. Basu

College of William and Mary - Department of Economics

Nancy H. Chau

Cornell University - School of Applied Economics and Management; IZA Institute of Labor Economics

Abstract

A model of North-South intraindustry trade in quality differentiated products is proposed to examine the role of country-of-origin reputation in determining the competitive edge of emerging industries. It is shown that if consumers rationally harbor negative expectations about the quality of Southern products, economic progress in either the North or the South shifts the terms of trade against Southern exports, and worsens Southern producers' incentive to produce high-quality products. In addition, the paper illustrates the role of income redistributive policies in shifting consumer's demand in favor of Southern high-quality products.

Suggested Citation

Basu, Arnab K. and Chau, Nancy H., Asymmetric Country-of-Origin Effects on Intraindustry Trade and the International Quality Race. Review of Development Economics, Vol. 2, pp. 140-166, June 1998. Available at SSRN: https://ssrn.com/abstract=468292

Arnab K. Basu (Contact Author)

College of William and Mary - Department of Economics ( email )

Williamsburg, VA 23187-8795
United States
757-221-1318 (Phone)
757-221-1175 (Fax)

HOME PAGE: http://faculty.wm.edu/akbasu/

Nancy H. Chau

Cornell University - School of Applied Economics and Management ( email )

Ithaca, NY 14853
United States
607-255-4463 (Phone)
607-255-9984 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
22
Abstract Views
737
PlumX Metrics