英文摘要 |
This paper constructs a vertical intra-industry trade (VIIT) model to explore the welfare effects of economic integration with different quality products as well as the role of the degree of quality differentiation. We take into account both popular settings of trade costs in the literature – transport costs and tariffs – and find that there is a significant diversity in welfare efficacy. In the transport costs setting, no matter what the product quality differences are, the low quality country will be better off as economic integration proceeds. However, the high quality country might be better off or worse off during the process of economic integration, depending on the degree of quality differentiation. This implies that what is good for the high quality country also benefits the low quality country, but the opposite is not always true. Contrarily, in the tariffs setting, a drop in trade costs definitely benefits the high quality country, while it may harm the low quality country. This shows that a tariff reduction gives rise to a conflict between the two countries, and economic integration is not always an easy road to travel on. |