Alchian and Allen show that a per unit transactions cost lowers the relative price of, and raises the relative demand for, high-quality goods. We extend their theory, deriving a relationship between per unit and ad valorem trade costs and the quality composition of trade. Detailed international...

We model demand for quality differentiated goods to derive a relationship between trade costs and the quality composition of trade. Detailed data on traded goods' prices, quantities and shipping costs for many importers and exporters are used to test these predictions. These data provide a...

We model demand for quality differentiated goods to derive a relationship between trade costs and the quality composition of trade. Detailed data on traded goods' prices, quantities and shipping costs for many importers and exporters are used to test these predictions. These data provide a...