Technology, Preference for Quality, and Vertical Intra-Industry Trade
Le Duc Niem, Taegi Kim
DOI: 10.4236/me.2010.13014   PDF    HTML     5,174 Downloads   9,366 Views   Citations


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.

Share and Cite:

Niem, L. and Kim, T. (2010) Technology, Preference for Quality, and Vertical Intra-Industry Trade. Modern Economy, 1, 129-133. doi: 10.4236/me.2010.13014.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] R. Bergoeing and T. J. Kehoe, “Trade Theory and Trade Facts,” Federal Reserve Bank of Minneapolis Research Department Staff Report No. 284, 2003.
[2] H. Gabrisch and M. L. Segnana, “Vertical and Horizontal Patterns of Intra-Industry Trade between EU and Candidate Countries,” IWH-Sonderheft, Halle Institute for Economic Research, 2003.
[3] P. Krugman, “Increasing Returns, Monopolistic Competition, and International Trade,” Journal of International Economics, Vol. 9, No. 4, November 1979, pp. 469-479.
[4] K. Lancaster, “Intra-Industry Trade under Perfect Monopolistic Competition,” Journal of International Economics, Vol. 10, No. 2, May 1980, pp. 151-175.
[5] H. Flam and E. Helpman, “Vertical Product Differentiation and North-South Trade,” The American Economic Review, Vol. 77, No. 5, December 1987, pp. 810-822.
[6] J. C. Hallak, “A Product-Quality View of the Linder Hypothesis,” The Review of Economics and Statistics, Vol. 92, No. 3, August 2010, pp. 238-265.
[7] S. Linder, “An Essay on Trade and Transformation,” Wiley, New York, 1961.
[8] T. Kim and L. D. Niem, “Product Quality, Preference Diversity, and Intra-Industry Trade,” The Manchester School, forthcoming, 2010.
[9] J. Gabszewicz, and J. F. Thisse, “Price Competition, Quality and Income Disparities,” Journal of Economic Theory, Vol. 20, No. 3, June 1979, pp. 340-359.
[10] X. Wauthy, “Quality Choice in Models of Vertical Differentiation,” The Journal of Industrial Economics, Vol. 44, No. 3, September 1996, pp. 345-353.
[11] L. Beloqui and J. M. Usategui, “Vertical Differentiation and Entry Deterrence: Reconsideration,” WP 2005-06, Dept. Fundamentos del Analisis Economico II, Universidad del Pais Vasco, 2005.
[12] E. Helpman and P. Krugman, “Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and the International Economy,” Wheatsheaf Books, Brighton, 1985.

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.