Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/75541 
Year of Publication: 
2000
Series/Report no.: 
CESifo Working Paper No. 387
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
In this paper we use a model of vertical product differentiation to cast doubt on the general validity of the import demand function as specified in macroeconomic models. The empirical importance of our theoretical concerns is then examined with the aid of two hypotheses. According to the first hypothesis, an increase in domestic wages is expected to reduce the share in total imports for goods in which the domestic comparative advantage is in high quality varieties of these goods. The second hypothesis states that an increase in non-wage income will increase the share of a good's imports if the country has comparative advantage in high quality varieties of this good. We find considerable empirical support for both hypotheses in the data for Germany, Japan and the United States.
Document Type: 
Working Paper
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