Product Mix and Firm Productivity Responses to Trade Competition

Abstract We document how demand shocks in export markets lead French multiproduct exporters to reallocate the mix of products sold those destinations. In response positive shocks, firms skew their sales toward best-performing products. develop a theoretical model and derive specific conditions (with endogenous price elasticities) needed generate these product-mix reallocations. Under conditions, increased competition from also induces productivity changes within firm. empirically test for this connection between firms. find that is economically substantial.