Big Data

North-South Trade And Growth: The Role Of Product Quality

Date Added: Dec 2009
Format: PDF

The traditional trade models, which rely on a comparative advantage based on regions' technology or endowments, or the new trade theory, designed to explain trade between the countries at a similar level of development, fail to replicate recent evidence on world trade patterns and prices. This evidence reveals North-South specialization across products of the same industries and product groups but different quality, rather than across different industries. Furthermore, countries at a higher level of technological development have higher export prices, which shows that more advanced technology does not necessarily imply higher cost efficiency.