Heterogeneous Firms and Trade

Marc J. Melitz, Stephen J. Redding

Research output: Chapter in Book/Report/Conference proceedingChapter

217 Scopus citations


This chapter reviews the new approach to international trade based on firm heterogeneity in differentiated product markets. This approach explains a variety of features exhibited in disaggregated trade data, including the higher productivity of exporters relative to non-exporters, within-industry reallocations of resources following trade liberalization, and patterns of trade participation across firms and destination markets. Accounting for these empirical patterns reveals new mechanisms through which the aggregate economy is affected by trade liberalization, including endogenous increases in average industry and firm productivity.

Original languageEnglish (US)
Title of host publicationHandbook of International Economics
PublisherElsevier B.V.
Number of pages54
StatePublished - 2014

Publication series

NameHandbook of International Economics
ISSN (Print)1573-4404

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Political Science and International Relations


  • Firm heterogeneity
  • International trade
  • Productivity


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