Trade boosts industry productivity, driving out inefficiency and fostering growth.
The article explores how international trade affects industries by making more productive firms export and less productive ones exit the market. As trade exposure increases, firms with higher productivity levels benefit, leading to industry-wide productivity growth. This growth contributes to overall welfare, showing a previously unexamined benefit of trade. The study adapts existing models to incorporate firm-level productivity differences and highlights the importance of firms' decisions to enter the export market based on their productivity levels.