Large economies export more in absolute terms than do small economies. We use data on shipments by 126 exporting countries to 59 importing countries in 5,000 product categories to answer the question: How? Do big economies export larger quantities of each good (the intensive margin), a wider set of goods (the extensive margin), or higher-quality goods? We find that the extensive margin accounts for around 60 percent of the greater exports of larger economies. Within categories, richer countries export higher quantities at modestly higher prices. We compare these findings to some workhorse trade models. Models with Armington national product differentiation have no extensive margin, and incorrectly predict lower prices for the exports of larger economies. Models with Krugman firm-level product differentiation do feature a prominent extensive margin, but overpredict the rate at which variety responds to exporter size. Models with quality differentiation, meanwhile, can match the price facts. Finally, models with fixed costs of exporting to a given market might explain the tendency of larger economies to export a given product to more countries. (JEL F12, F43)

Bilateral, product-level data exhibit a number of strong patterns that can be used to evaluate international trade theories, notably the spatial incidence of “export zeros ” (correlated with distance and importer size), and of export unit values (positively related to distance). We show that leading theoretical trade models fail to explain at least some of these facts, and propose a variant of the Melitz model that can account for all the facts. In our model, high quality firms are the most competitive, with heterogeneous quality increasing with firms ’ heterogeneous cost. (JEL F11, F14, F40) The gravity equation relates bilateral trade volumes to distance and country size. Countless gravity equations have been estimated, usually with “good ” results, and trade theorists have proposed various theoretical explanations for gravity’s success. However, the many potential explanations for the success of the gravity equation make it a problematic tool for discriminating among trade models. 1 As a matter of arithmetic, the value of trade depends on the number of goods

How large are the benefits of transportation infrastructure projects, and what explains these benefits? To shed new light on these questions, I collect archival data from colonial India and use it to estimate the impact of India’s vast railroad network. Guided by six predictions from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) eliminated the responsiveness of local prices to local productivity shocks (but increased the transmission of these shocks between regions); (4) increased the level of real income (but harmed neighboring regions without railroad access); (5) decreased the volatility of real income; and that (6), a sufficient statistic for the effect of railroads on welfare in the model accounts for virtually all of the observed reduced-form impact of railroads on real income. I find similar results from an instrumental variable specification, no spurious effects from over 40,000 km of lines that were approved but never built, and tight bounds on the estimated impact of railroads. These results suggest that transportation infrastructure projects can improve welfare significantly,

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Abstract This paper analyzes the heterogenous reaction of exporters to exchange rate changes using a very rich French firm-level dataset with destination-specific export values and volumes on the period 1995-2005. We find that high-performance firms react to a depreciation by increasing significantly more their markup and by increasing less their export volume. This heterogeneity in pricing to market is robust to different measures of performance, samples and econometric specifications. It is consistent with models where demand elasticity decreases with firm performance. Since aggregate exports are concentrated on high productivity firms, precisely those that absorb more exchange rate movements in their markups, heterogenous pricing to market may partly explain the weak impact of exchange rate movements on aggregate exports. * We thank the referees and the editor for very insightful comments. We also thank

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Abstract: A large literature has shown that geographic frictions reduce trade, but has not clarified precisely why. In this paper we provide some insight into why such frictions matter by examining what parts of trade these frictions reduce most. Using data that track manufacturers’ shipments within the United States on an exceptionally fine grid, we find that the pattern of shipments is extremely localized. Shipments within 5-digit zip codes, which have a median radius of just 4 miles, are 3 times larger than shipments outside the zip code. We decompose aggregate shipments into extensive and intensive margins, and show that distance and other frictions reduce aggregate trade values primarily by reducing the number of commodities shipped and the number of establishments shipping. Extensive margins are particularly important over very short distances. We examine trade in intermediate goods as an explanation for highly localized shipments and the dominant role of the extensive margin and find evidence consistent with this hypothesis. In another significant finding, we find no evidence of state-level home bias when distances are measured precisely and trade is observed over a very fine grid. Acknowledgements: We thank the editor and an anonymous referee for very helpful comments. We also thank Jack Barron, Tim Cason, Michael Ferrantino, and John Ries for comments on an earlier draft. We thank Arnold Rezneck of the Center for Economic Studies for his help with the data. All errors are the responsibility of the authors..

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We develop a model of international trade with export quality requirements and two dimen-sions of firm heterogeneity. In addition to "productivity", firms are also heterogeneous in their "caliber " — the ability to produce quality using fewer fixed inputs. Compared to single-attribute models of firm heterogeneity emphasizing either productivity or the ability to produce quality, our model provides a more nuanced characterization of firms ’ exporting behavior. In particular, it explains the empirical fact that firm size is not monotonically related with export status: there are small firms that export and large firms that only operate in the domestic market. The model also delivers novel testable predictions. Conditional on size, exporters are predicted to sell products of higher quality and at higher prices, pay higher wages and use capital more inten-sively. These predictions, although apparently intuitive, cannot be derived from single-attribute models of firm heterogeneity as they imply no variation in export status after size is controlled for. We find strong support for the predictions of our model in manufacturing establishment

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