London School of Economics and

ABSTRACT: This paper re-explores the relation between a country’s level of wealth and the mix of products it exports. We argue that both are simultaneously determined by countries ’ capabilities i.e. by coun-tries ’ productivity and quality levels for each good. Our theoretical setup has two features. (1) Some goods have fewer high-quality pro-ducers/countries than others i.e. there is Ricardian comparative advan-tage. (2) Imperfect competition allows high- and low-quality producers to coexist, which we refer to as ‘product ranges. ’ These two features gen-erate a very particular non-monotonic, general equilibrium relationship between a country’s export mix and its GDP per capita. We show that this non-monotonicity permeates the international data on trade and GDP per capita. Key words: quality, economic development, international trade JEL classification: F12, O10 ∗. We thank Q. Zhang, Michelle Liu and especially Leilei Shen for excellent research assistance. We have benefite