The thesis is organized as follows. Chapter 2 contains a survey of the three most in‡fluential models on fi…rm heterogeneity and of the most important empirical work on firrm heterogeneity. The chapter starts with a brief review of the homogeneous productivity imperfect competition literature. Chapter 2 …finishes with a comparison of the three most in‡fluential models of fi…rm heterogeneity and the oligopoly model put forward in the thesis. Chapter 3 addresses exporting uncertainty under heterogeneous popularity. Chapter 4 contains the chapter on …firm heterogeneity under oligopoly. Chapter 5 constitutes the models on …firm heterogeneity and endogenous quality. Chapter 6 points out the within-sector specialization model. Chapter 7 addresses the effect of importer characteristics on unit values and the role of markups and quality to explain this effect. Chapter 8 concludes.

This thesis examines the effect of international trade between industrialised countries on three topics of interest from a macroeconomic perspective. In chapter 2, I investigate the effects of a reduction in the costs of international trade on wage inequality between skilled and unskilled labour. Chapter 3 analyses how trade liberalisation affects firm-level and aggregate investment in process innovation. In chapter 4, I turn to the links between trade openness and output volatility at the firm level. I approach these three questions with a common methodology, which stresses the importance of accounting for firm-level heterogeneity in order to gain a better understanding of the macroeconomic consequences of modern international trade.