(MC) sector in which firms may have heterogeneous productivity levels. Analysis encompasses cases in which the domestic MC … through both a terms-oftrade and a variety effect, and the paper shows how the relative importance of each depends on the …

(MC) sector in which firms may have heterogeneous productivity levels. Analysis encompasses cases in which the domestic MC … through both a terms-oftrade and a variety effect, and the paper shows how the relative importance of each depends on the …

and countries. Firms' export decisions depend on a combination of firm “productivity” and firm-product-country “consumer … tastes,' both of which are stochastic and unknown prior to the payment of a sunk cost of entry. Higher-productivity firms … export a wider range of products to a larger set of countries than lower-productivity firms. Trade liberalization induces …

sunk cost and randomly draw their productivity level. Governments collect lump-sum taxes and subsidize these sunk entry …