We analyze a firm that produces a final good from multiple intermediates that can each be sourced domestically or from a low-wage country. The model explicitly incorporates that sourcing decisions of intermediates are interdependent. Equilibrium predictions depend crucially on a key modeling...

The firm-level approach to intra-industry trade reveals that the variation in the number of exporters or exported varieties (extensive margin) accounts for a greater share of the changes in aggregate trade than the variation in the average exports per firm variety (intensive margin). This paper...