A model of heterogeneous firms with multiple products and two production factors (labor and capital) is used to study how trade liberalization affects firms’choices through both product and factor markets. Trade liberalization is shown to always redistribute capital toward more efficient firms...

A model of heterogeneous firms with multiple products and two production factors (labor and capital) is used to study how trade liberalization affects firms' choices through both product and factor markets. Trade liberalization is shown to always redistribute capital toward more efficient firms...

This paper presents a simple model of monopolistic competition that features a general class of additively separable preferences without any fixed costs. While trade always crowds out less productive firms as long as countries are symmetric, we show that the impact is independent of entry/exit a...

When countries are asymmetric, trade with heterogeneous firms can crowd in, rather than crowd out, less productive firms, and less productive firms almost always specialize in export. Whether and how these phenomena will arise depends on a country’s standing in the world. Our study helps...