Love for Quality, Comparative Advantage, and Trade We would like to thank

Abstract We propose a Ricardian trade model with horizontal and vertical di¤erentiation, where willingness to pay for quality rises with income, and productivity di¤erentials across countries are stronger for high-quality varieties of goods. Our theory predicts that the scope for trade widens and international specialisation intensi…es as incomes grow and wealthier consumers raise the quality of their consumption baskets. This implies that comparative advantages strengthen gradually over the path of development as a by-product of the process of quality upgrading. The evolution of comparative advantages leads to speci…c trade patterns that change over the growth path, by linking richer importers to more specialised exporters. We provide empirical support for this prediction, showing that the share of imports originating from exporters exhibiting a comparative advantage in a speci…c product correlates positively with the importer's GDP per head