This article analyzes the role of credit frictions in a trade model where producers differ in their capabilities to conduct process and quality innovations and require external finance for investments. Accounting for cost‐based and quality‐based sorting of firms in a unified framework allows...

This article develops a model that incorporates workers' fair wage preferences into a general equilibrium framework with heterogeneous firms. In a setting where the wage considered to be fair by workers depends on the productivity of the firm they are working in, we study the determinants of...