Product Quality, Linder, and the Direction of Trade / Juan Carlos Hallak.

Format:

Book

Author/Creator:

Hallak, Juan Carlos.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10877.

NBER working paper series no. w10877

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

A substantial amount of theoretical work predicts that quality plays an important role as a determinant of the global patterns of bilateral trade. This paper develops an empirical framework to estimate the empirical relevance of this prediction. In particular, it identifies the effect of quality operating on the demand side through the relationship between per capita income and aggregate demand for quality. The model yields predictions for bilateral flows at the sectoral level, and is estimated using cross-sectional data for bilateral trade among 60 countries in 1995. The empirical results confirm the theoretical prediction: rich countries tend to import relatively more from countries that produce high quality goods. The paper also shows that a severe aggregation bias explains the failure of the literature so far to find consistent empirical support for the "Linder hypothesis", the conjectured corollary to the first theory relating product quality and the direction of trade.

Notes:

Print version record

November 2004.