This paper studies a systematic link between the choice of export destinations and technology di fferences across firms. Our premise is that fi rms diff er in the relative the effi ciency with which they can utilize skilled labor. In a context in which quality provision is skill-intensive and consumers in high income countries are more willing to pay for quality, exporting fi rms that are more e fficient in the use of skilled labor export relatively more to high income destinations. The contribution of the paper is twofold. First, we propose a new estimation method of production functions that allows for heterogeneity in the production function coe fficients across rms and addresses the aggregation problem when rms are multiproduct.

The estimation strategy is based on an extension of the structural control variable approach (Olley and Pakes (1996); Levinsohn and Petrin (2003)) to multi-dimensional heterogeneous parameters. Second, we provide an empirical measure of capability of quality production and show that it is a determinant of the choice of exports, export destinations, and quality using rm-level data from Chile.