The Korean Economic Review
Economic Development and Trade of Quality Differentiated Goods
Le Duc Niem (Chonnam National University) and Taegi Kim (Chonnam National University)Year 2009Vol. 25No. 2
In this paper, we investigate the impact of economic development on international trade from a theoretical perspective, which considers qualitydifferentiated products and preference diversity for quality. We model two trading partners, and evaluate the effects of per capita income andtechnology on trade volume and intra-industry trade. We show that the volume of trade and the share of intra-industry trade increases as per capita income increases. Furthermore, we also demonstrate that the volume of trade is proportional to the level of technology, and that the intra-industry trade share increases as the technology in the two countries become similar. This theoretical model may explain why trade volume and intra-industry trade tend to be higher in rich countries than in poor countries.