We develop a monopolistically competitive model of trade with firm heterogeneity - in terms of productivity differences … productivity of competing firms. We analyze how these features vary across markets of different size that are not perfectly … in that market. Aggregate productivity and average markups thus respond to both the size of a market and the extent of …

increased competition from demand shocks in export markets - and the induced product mix reallocations - induce productivity … changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi …-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity are substantial - and …

that this quantitative approach typically abstracts from: trade-induced changes in domestic productivity. Using a model of … sequential production, in which trade induces a reorganization of production that raises domestic productivity, we show that the …