The extent and direction of causation between micro volatility and business cycles are debated. We examine, empirically and theoretically, the source and e¤ects of uctuations in the disper-sion of producer-level sales and production over the business cycle. On the theoretical side, we study the e¤ect of exogenous …rst- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogeneous producers and an endogenous dynamic export participation decision. First-moment shocks cause endogenous uctuations in producer-level dis-persion by reallocating production internationally, while second-moment shocks lead to increases in trade relative to GDP in recessions. Empirically, using detailed product-level data in the motor vehicle industry and industry-level data of U.S. manufacturers, we …nd evidence that international reallocation is indeed important for understanding cross-industry variation in cyclical patterns of measured dispersion. JEL classi…cations: E31, F12.

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