Firms and economic performance: A view from trade

Abstract

We use transaction-level US import data to compare firms from virtually all countries in the world competing in a single destination market. First, we decompose countries’ sales into the contribution of the number of firm-products, their average appeal and its dispersion. Then, by making distributional assumptions consistent with the data, we identify new structural parameters that are useful in understanding the role of firm heterogeneity for trade and economic performance. We find that differences in the dispersion of appeal are quantitatively important in explaining exports, even after controlling for selection, average appeal and other determinants of trade, and that they are relevant for welfare. We also find that countries with a higher GDP per capita export more per firm largely because they have a higher dispersion of appeal, hence more heterogeneous firms.