We investigate to what extent worker heterogeneity explains the well-known wage and productivity exporter premiums, employing a matched employer-employee data set for Norwegian manufacturing. The wage premium falls by roughly 50% after controlling for observed and unobserved worker...

Casual empiricism suggests that additive trade costs, such as quotas, per-unit tariffs, and, in part, transportation costs, are prevalent. In spite of this, we have no broad and systematic evidence of the magnitude of these costs. We develop a new empirical framework for estimating additive...

Multinational production (MP) can lead to large gains through international technology sharing. However, empirical evidence suggests that geography matters for MP: Affiliate sales fall in distance from the headquarters. We introduce intrafirm trade into a standard model of exports and MP and...

We expect trade liberalization to give rise to aggregate productivity gains, as the least efficient firms are forced out, and labor is reallocated towards the best performing firms. But the positive intra-industry reallocation effects rely on the stark assumption that exporters’ superior...

When trade costs are of the iceberg type (Samuelson 1952) and markups are independent of trade costs, relative prices across markets are distorted, but relative prices within markets are not. When trade costs depart from the analytically convenient iceberg type, distortion will also occur within...

In this paper we ask why the gravity model of international trade also work well for foreign direct investment (FDI) flows or multinational production (MP). We propose a model of trade and horizontal FDI, where the subsidiary is allowed to source inputs from the headquarters. Under certain...