Emerald Management Review:
North-South competition in quality

Abstract:

Purpose - To compare trade between Southern hemisphere and Northern hemisphere countries based on the unit values shipped. Design/approach/methodology - Introduces the Helpman and Krugman (1985) trade theory that different countries specialize in different industries, and similar countries specialize in different varieties sold at the same price Uses the BAC1 database to identify EU trade by transformation level and market segment with six named countries. Regresses bilateral exports for 163 countries for ten years.

Findings - Finds that the North and South are not competing in varieties, and products are much more differentiated than anticipated by Heckscher and Ohlin. Links the unit value of exports to the level of development of the exporter. Describes how market shares are changing rapidly, particularly because of Chinese trade expansion, high-tech products are widely produced in the South, and the EU has reacted by raising the quality of its product varieties.

Research limitations/implications - Attacks conventional wisdom in asserting that outsourcing raises relative skilled wages and productivity in industries.

Originality/value - Presents a view of world trade that is rich and thought provoking for students as well as for researchers.

Keywords:

Article Type:

Technical paper

Reference:

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