The present paper explores the effect of trade liberalization on the level of productivity as well as the rate of productivity growth in an R&D-based model with heterogeneous firms. We introduce new and plausible features that are absent in existing studies. First, technical progress takes the...

This paper links firms’ endogenous quality choice to worker effort and efficiency wages. The model generates two distinct features: effort is rewarded and quality is rewarded. Then firms with higher monitoring accuracy produce higher quality and pay higher wages. When trade is opened, while...