International Trade with Heterogeneous Firms: Theory and Evidence

International trade is dominated by a small number of very large firms. Models with heterogeneous firms have been developed to study the causes and consequences this observation. The canonical model shows that leads between-firm reallocations selection: it shifts employment towards best attributes forces marginal exit. also illustrates role heterogeneity, its various sources, in explaining volume firm-level margins adjustment. Consistent model, earlier empirical studies documented exporting rare activity, are larger more productive than other firms, liberalization reallocates market shares best-performing countries. More recent using transaction-level data unveiled additional salient features flows. First, sales foreign highly concentrated. Second, both extensive margin (number firms) intensive (average export per firm) important level exports changes over time. heterogeneity across associated higher along margins. Third, increased competition top hence can increase concentration from any country origin. Numerous extensions benchmark proposed aspects, such as relevance multi-product multinational extent which endogenous firms' choices, but some open challenges still remain.