Technology Transfer,Quality Standards,and North–South Trade |
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Authors: | Munirul H. Nabin Xuan Nguyen Pasquale M. Sgro |
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Affiliation: | 1. Deakin Graduate School of Business, Deakin University, , VIC, 3125 Australia;2. +61‐3‐9244‐5245+61‐3‐9244‐5533;3. Deakin Graduate School of Business, Faculty of Business and Law, Deakin University, , VIC, 3125 Australia |
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Abstract: | This paper examines the economic consequences of technology transfer through licensing in a North–South model of vertical product differentiation, based on a product‐line pricing framework. With its limited technological expertise, the southern firm cannot export to the northern market without purchasing the northern firm's “clean” and low‐cost technology. With North–South cost‐asymmetry, we conclude that the transfer of technology through licensing promotes trade, product variety and improves global welfare. However, without government intervention, the private levels of product quality chosen by firms tend to be lower than the socially optimal levels. This finding helps to explain why developed countries often set quality standards for imported foreign products. |
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