Research in international trade, both theoretical and quantitative, is increasingly focussedon the role of firm heterogeneity in shaping trade flows. One strand of the literature showshow firm-specific productivity shocks affect the mix of exporting firms and their foreign salesvolumes (e.g., Clerides, Lach, and Tybout, 1998; Bernard and Jensen, 1999; Melitz, 2003;Bernard, Eaton, Jensen, and Kortum, 2003; Das, Roberts, and Tybout, 2007; Bernard, Jensen,Reading, and Schott, 2007). These studies provide insight into why some producers export andothers do not, and the role of market entry costs in shaping export dynamics. Another strandof the literature documents and interprets the relationship between firms´ productivity levelsand the collection of foreign markets that they serve (Eaton, Kortum, and Kramarz, 2004 and2007). These papers find that most exporting firms sell to only one foreign market, with thefrequency of firms´ selling to multiple markets declining with the number of destinations. Atthe same time, firms selling to only a small number of markets tend to sell to the most popularones. Less popular markets are served by firms that export very widely. These patterns areconsistent with the notion that firms with relatively low marginal costs can profitably exploitrelatively more foreign markets.
