This paper develops a fully-endogenous, variety-expansion growth model with firm-specific quality heterogeneity, limit pricing, and an endogenous distribution of markups. Trade induces only firms with high-quality products to export, whereas firms with low-quality products serve only the...

This paper develops a trade model with firm-specific quality heterogeneity in markets where firms face the threat of imitation and engage in limit-pricing strategies. The model generates an endogenous distribution of prices and markups. Firms producing high-quality (high-price) products export,...