Product and process productivity: Implicati

We develop a model of internat “process productivity”, which is roduct productivity”, defined as firms ' ability to develop high-quality products s. The distinction between these two sources of productivity, together with the theoretical predictions. Conditional on size, exporters sell higher quality products, charge higher prices, pay higher input prices and higher wages, and use capital more intensively. Some of these predictions had already been documented in the empirical literature but lacked a theoretical framework for properly interpreting them. We conduct systematic tests of these predictions using manufacturing establishmen