We develop a model of international trade with two sources of firm heterogeneity: "productivity" and "caliber". Productivity is modeled as is standard in the literature. Caliber is the ability to produce quality using few fixed inputs. While there is no quality restriction to sell domestically,...

We develop a model of international trade with export quality requirements and two dimensions of firm heterogeneity. In addition to "productivity", firms are also heterogeneous in their "caliber" — the ability to produce quality using fewer fixed inputs. Compared to single-attribute models of...

The Linder hypothesis states that countries of similar income per capita should trade more intensely with one another. This hypothesis has attracted substantial research over decades, but the empirical evidence has failed to provide consistent support for it. This paper shows that the reason for...