We analyze how trade affects aggregate volatility using a multi-country, multiindustry, and multi-destination framework … covariances). We then use this framework to run counterfactuals changing the degree of destination market diversification …, we find that the effect of increased destination market diversification is quantitatively important in reducing aggregate …

technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks …. In our model, the expansion in the number of varieties provides diversification benefits against variety-specific shocks … and it hence lowers the volatility of output. Technological complexity evolves endogenously in response to profit …