Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: International Trade and Trade Reforms II No. B15-V1
We show that the effect of fixed costs on international trade is lower in industries with a high degree of vertical product differentiation. We extend an international trade model by endogenous quality investmetns and use both aggregate trade data and firm-level data to estimate gravity equations of exports. Accounting for quality lowers the positive gains from trade and leads to more heterogeneous effects across industries compared to a trade model without quality.