To explain the spatial selection of vertically di fferentiated firms, this paper incorporates heterogeneous preferences and heterogeneous quality productions into a framework of the footloose capital model, in which labor is immobile. In two regions with identical population size, when trade...

We develop a dynamic model of intermediate goods trade in which the pattern and the extent of intermediate goods trade are endogenous. We consider a small open economy whose final good production employs an endogenous array of intermediate goods, from low technology (high cost) to high...