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Trade of quality differentiated goods and import elasticities

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Abstract
This paper studies imports of quality products. The issue is more and more relevant because of the strong evidence of such differentiation in international trade. We first derive individual demand, then we aggregate without using the representative consumer hypothesis. We find that quality reduces reaction of imports to prices without affecting reaction to income. At the national level, it emerges that imports of richer country are less reactive to prices. Such countries can easily switch to high quality-high price productions without trade balance and competitive problems. The opposite seems true for poorer countries. Finally, quality causes parameter non-constancies in estimation and overlooking this determinant of imports causes underestimates of elasticities in absolute value.

Suggested Citation

  • Stefano Chiarlone, 2000. "Trade of quality differentiated goods and import elasticities," KITeS Working Papers 112, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2000.
    • Handle: RePEc:cri:cespri:wp112
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    References listed on IDEAS

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    Cited by:

    1. Pavel Kadochnikov, 2006. "An Analysis of Import Substitution in Russia after the 1998 Crisis," Research Paper Series, Gaidar Institute for Economic Policy, issue 95, pages 148-148.
    2. Borin, Alessandro & Lamieri, Marco, 2007. "Estimating Product Quality in International Trade," MPRA Paper 14678, University Library of Munich, Germany.

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    More about this item

    Keywords

    Import demand; Quality differentiation; Price and income elasticity.;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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