An influential literature shows that product quality varies widely across countries and industries. In this paper, we propose and test an explanation that rests on the interplay between cross-country differences in financial frictions and cross-industry differences in financial vulnerability. We...

We study how financial frictions affect firm-level heterogeneity and trade. We build a model where productivity differences across monopolistically competitive firms are endogenous and depend on investment decisions at the entry stage. By increasing entry costs, financial frictions lower the...