Trade adjustment dynamics and the welfare gains from trade

We introduce time and risk into the fixed-variable cost tradeoff in heterogeneous firm trade models: Investing exporting gradually stochastically lowers costs of exporting. In model, aggregate dynamics arise from producer-level decisions to invest lowering their future variable export costs, tariff reforms generate time-varying elasticities. The gains reducing tariffs substituting away creation towards This substitution is larger when new exporters are smaller take longer grow successful exporters. welfare much than long-run changes consumption cannot be recovered a static model or formulas based on those models. Comparing steady-state outcomes can predict loss reform actual change positive.