This paper proposes a new mechanism linking trade and wage inequality in developing countries - the quality-upgrading mechanism - and investigates its empirical implications in panel data on Mexican manufacturing plants. In a model with heterogeneous plants and quality-differentiated goods, only...

This paper examines how schools choose class size and how households sort in response to thosechoices. Focusing on the highly liberalized Chilean education market, we develop a model inwhich schools are heterogeneous in an underlying productivity parameter, class size is a componentof school...