Firms in International Trade

Abstract

Since the mid-1990s, researchers have used micro datasets to study countries' production and trade at the firm level and have found that exporting firms differ substantially from firms that solely serve the domestic market. Across a wide range of countries and industries, exporting firms have been shown to be larger, more productive, more skill- and capital-intensive, and to pay higher wages than nonexporting firms. These differences exist even before exporting begins and have important consequences for evaluating the gains from trade and their distribution across factors of production. The new empirical research challenges traditional models of international trade and, as a result, the focus of the international trade field has shifted from countries and industries towards firms and products. Recently available transaction-level U.S. trade data reveal new stylized facts about firms' participation in international markets, and recent theories of international trade incorporating the behavior of heterogenous firms have made substantial progress in explaining patterns of trade and productivity growth.