Trade with R&D costs to entering foreign markets

In this paper, we present a standard quality ladders endogenous growth model with one significant new assumption, that it takes time for firms to learn how to export. We show that this model without Melitz-type assumptions can account for all the evidence that the Melitz (2003) model was designed to explain plus much evidence that the Melitz model cannot account for. In particular, consistent with the empirical evidence, we find that trade liberalization leads to a higher exit rate of firms, that exporters charge higher prices for their products and that many large firms do not export.