Abstract
In this paper, I present a quality ladders endogenous growth model where firms differ in their productivities. I study the effect openness to trade has on firm productivity and firm turnover. Most theoretical papers in this literature assume an exogenous firm turnover rate. In this paper, the firm turnover rate is endogenously determined and in line with the empirical evidence, it depends on variable costs to trade. The paper is inspired by the theoretical work of Melitz (2003) and obtains Melitz-type results but with a different set of assumptions. In particular, I assume that firms invest in learning how to become exporters. I show that exporters are on average more productive than non-exporters and sell their products at higher prices. I also find that trade liberalization increases firm productivity and leads to a higher steady-state firm turnover rate, consistent with the empirical evidence.