Vertical Product Differentiation,Intra-Product Specification,and North-South Trade

The model of North-South trade with vertical product differentiation and intra-product specification explains trade patterns and affecting factors. In our model,production technology is still the significant factor determining specification patterns. Faster technical improvement in the South enlarges production range and leads to new high-quality products. Faster technical progress in the North leads the production range to shrink,which means the North abandons low-quality products and specifies in high-quality products. When two countries make technical progress in different production stages simultaneously,they tend to produce high-quality products in the stage in which they make technical progress.