@UNPUBLISHED{Gaubert-Itskhoki_NBERWP_2018,
  author = 	{Cecile Gaubert and Oleg Itskhoki},
  title =	{Granular Comparative Advantage},
  year =	{2018},
  month =	{July},
  note =	{NBER Working Papers No.~24807},
  url = {\url{https://www.nber.org/papers/w24807}},
  abstract={Large firms play a pivotal role in international trade, shaping the export patterns of countries. We propose and quantify a granular multi-sector model of trade, which combines fundamental comparative advantage across sectors with granular comparative advantage embodied in outstanding individual firms. We develop an SMM-based estimation procedure, which takes full account of the general equilibrium of the model, to jointly estimate these fundamental and granular forces using French micro-data with information on firm domestic and export sales across manufacturing industries. We find that granularity accounts for about 20\% of the variation in realized export intensity across sectors, and is more pronounced in the most export-intensive sectors. In turn, idiosyncratic firm dynamics accounts for a large share of the evolution of a country's comparative advantage over time. Governments face strong incentives to target trade policy at large individual foreign exporters, and to use lenient antitrust regulation at home to substitute for beggar-thy-neighbor trade policy.},
  doi={10.3386/w24807}
}