Heterogeneity And Trade

Aggregate production functions are a standard feature of the trade theorist's toolbox. While this modeling device has generated some fundamental insights, it presents one obvious shortcoming: it necessarily ignores any effect that the distribution of factor endowments across agents may have on international trade flows. This paper develops a general framework that can shed light on these effects and discusses several applications. The paper is to offer a unifying perspective on the relationship between heterogeneity and trade.