May 2007 | Andrew B. Bernard, J. Bradford Jensen, Stephen Redding and Peter K. Schott
This paper examines the role of firms in international trade, highlighting the differences between trading and non-trading firms and how these differences challenge standard trade models. It introduces new stylized facts about firms and trade using transaction-level U.S. trade data, revealing that the extensive margins of trade—such as the number of products and countries traded—are crucial for understanding the impact of distance on aggregate trade flows. The paper discusses how recent "heterogeneous-firm" models address these challenges, emphasizing the importance of firm heterogeneity in generating international trade and aggregate productivity growth. It also explores the concentration and scarcity of firms' exports, the range of products exported, and the variety of destinations, finding that trade is highly concentrated and that firms typically export multiple products. The paper concludes with suggestions for further theoretical and empirical research.This paper examines the role of firms in international trade, highlighting the differences between trading and non-trading firms and how these differences challenge standard trade models. It introduces new stylized facts about firms and trade using transaction-level U.S. trade data, revealing that the extensive margins of trade—such as the number of products and countries traded—are crucial for understanding the impact of distance on aggregate trade flows. The paper discusses how recent "heterogeneous-firm" models address these challenges, emphasizing the importance of firm heterogeneity in generating international trade and aggregate productivity growth. It also explores the concentration and scarcity of firms' exports, the range of products exported, and the variety of destinations, finding that trade is highly concentrated and that firms typically export multiple products. The paper concludes with suggestions for further theoretical and empirical research.