Specialization across goods and export quality

Abstract

This paper explores the link between specialization across goods and specialization within goods along the quality dimension. It develops a tractable many-country, many-industry Ricardian model with an integer number of heterogeneous firms producing each good, under a generic assumption about the distributions of firm efficiencies. In equilibrium, each country exports a range of qualities for each good that overlaps with the ranges of other countries following patterns that relate to wage differences, trade frictions, and absolute advantage. Under plausible assumptions and conditional on wages, the average quality of a country's exports within an industry increases with the country's revealed comparative advantage in the industry.