Theories of heterogeneous firms and trade

Research output: Contribution to journalReview articlepeer-review

113 Scopus citations


This article reviews the recent theoretical literature on heterogeneous firms and trade, which emphasizes firm selection into international markets and reallocations of resources across firms. We discuss the empirical challenges that motivated this research and its relationship to traditional trade theories. We examine the implications of firm heterogeneity for comparative advantage, market size, aggregate trade, the welfare gains from trade, and the relationship between trade and income distribution. Although a number of studies examine the endogenous response of firm productivity to trade liberalization, modeling internal firm organization and the origins of firm heterogeneity remain interesting areas of ongoing research.

Original languageEnglish (US)
Pages (from-to)77-105
Number of pages29
JournalAnnual Review of Economics
StatePublished - 2011

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • International trade
  • Selection into exporting
  • Within-industry reallocation


Dive into the research topics of 'Theories of heterogeneous firms and trade'. Together they form a unique fingerprint.

Cite this