Technology, Preference for Quality, and Vertical Intra-Industry Trade

Le Duc Niem, Taegi Kim
DOI: 10.4236/me.2010.13014                

Abstract

This paper provides a simple theoretical model to investigate determinants of the vertical IIT based on Bertrand price competition. We find that the volume of trade is higher among countries where R&D investments are larger. In addition, the vertical IIT share increases with the similarity between two countries in terms of technology and per-capita income. Our theoretical findings are consistent with recent empirical findings.

Keywords

Technology, Preference for Quality, Volume of Trade, Vertical Intra-Industry Trade

Conflicts of Interest

The authors declare no conflicts of interest.

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