The Volume and Composition of Trade Between Rich and Poor Countries.

Stokey, Nancy L.

North-South trade is studied m a model of vertical product differentiation. The South produces a low-quality spectrum of goods and the North a high-quality spectrum. An increase in the South's population lowers its relative wage, expands the spectrum of Southern goods at the top, and shifts the Northern spectrum upward An increase in Northern labour productivity raises its relative wage. if the increase is neutral or export-biased, then the South's terms of trade improve, the spectrum of Northern products expands, the spectrum of Southern products contracts, and the volume of trade grows If it is biased against Northern exports, these effects are reversed. Similar results hold for neutral increases in Southern productibility.

DEVELOPED countries; PRODUCT differentiation; DEVELOPING countries commerce; NEW product development; BRAND differentiation; MANUFACTURED products; EQUILIBRIUM; INDUSTRIAL productivity; COMMERCE; LABOR economics; LABOR supply

Review of Economic Studies, 1991, Vol 58, Issue 1, p63

0034-6527

Academic Journal

10.2307/2298045