International Monetary Fund, 1900 Pennsylvania Ave NW, Washington, DC 20431. E-mail: email@example.com. I am grateful for the invaluable advice of Timothy Kehoe, Manuel Amador, Kei-Mu Yi, and Doireann Fitzgerald. I would also like to thank the participants of the Trade and Development workshop at the University of Minnesota for their questions and comments. The research is supported by the University of Minnesota Doctoral Dissertation Fellowship. The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management. All errors are mine.