ABSTRACT
This chapter examines how tariff cut, FDI and increase in endowment of skilled labour force affects exportable product quality both in the presence and in the absence of international fragmentation. This study first develops a model without international fragmentation and then develops a model in the presence of international fragmentation. A four-sector, four-factor model of a small open developing economy has been considered for this purpose. Quality differentiation has been assumed in one of the four sectors that produces non-traditional exportable goods. In this structure, we have analysed some comparative static effects on exportable product quality which are very much relevant in a globalised world both in the absence and in the presence of international fragmentation. We have examined how such comparative static results differ between the situations of fragmentation and no fragmentation and how these results are opposite to that of the conventional wisdom.
