Trade liberalization hurts big firms, dampening gains and impacting aggregate income.
The study shows that in Denmark, most manufacturing revenue comes from industries with both big and small firms. When trade is opened up, big firms' profits are crucial for overall income. If a big firm prefers domestic sales, trade can hurt its profits by increasing local competition. In Denmark, trade boosts profits for most big firms, but one firm's loss cancels out the gains for everyone else.