Preferences, Country Bias and International Trade
REVIEW OF INTERNATIONAL ECONOMICS
Posted: 21 Mar 1997
The paper analyzes international trade in a Ricardian world where consumer preferences exhibit country bias. In particular, consumers differentiate between identical physical goods by country of manufacture. Unlike the classical Ricardian model, the pattern of international specialization in production depends on the preference structure. Possible equilibrium configurations include ones where both countries specialize incompletely and trade in both commodities, as well as situations where the pattern of specialization and trade is exactly the reverse of that in the classical Ricardian world. Both inter-industry and intra-industry trade can occur simultaneously though there are no market imperfections or scale economies.
JEL Classification: F11
Suggested Citation: Suggested Citation