TITLE:
Technology, Preference for Quality, and Vertical Intra-Industry Trade
AUTHORS:
Le Duc Niem, Taegi Kim
KEYWORDS:
Technology, Preference for Quality, Volume of Trade, Vertical Intra-Industry Trade
JOURNAL NAME:
Modern Economy,
Vol.1 No.3,
November
19,
2010
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.