1 Introduction and Basic Facts 4

2 Intraindustry Heterogeneity with Fixed Costs of Exporting: Melitz

(2003) 13

3 Intraindustry Heterogeneity and Bertrand Competition: Bernard,

Eaton, Jensen, and Kortum (2003) 27

4 Firms and the Decision to Export: Empirics 38

4.1 Exporting and Plant-Level Performance . . . . . . . . . . . . . . . . . . 38

5 The Relevance of Sunk Costs 47

6 Horizontal FDI: Brainard (1997) 53

7 Exports vs. FDI with Asymmetric Countries: Markusen and Venables

(2000) 63

8 Exports vs. FDI with Heterogenous Firms: Helpman, Melitz and

Yeaple (2003) 71

9 Vertical FDI: Theory and Evidence 82

1

10 The Theory of The Firm: Transaction-Cost Approaches 97

11 The Theory of The Firm: The Property-Rights Approach 107

12 The Theory of The Firm: Alternative Approaches 120

12.1 The Firm as an Incentive System: Holmstrom and Milgrom (1994) . . . 120

12.2 Formal andReal Authority: Aghion and Tirole (1997) . . . . . . . . . 126

12.3 Authority andHierarchies: Rosen (1982) . . . . . . . . . . . . . . . . . 129

13 Early Transaction-Cost Approaches 138

13.1 Ethier (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

13.2 Ethier andMarkusen (1996) . . . . . . . . . . . . . . . . . . . . . . . . 144

14 The Transaction-Cost Approach in Industry Equilibrium: McLaren

(2000) and Grossman and Helpman (2002) 148

14.1 Globalization and Vertical Structure: McLaren (2000) . . . . . . . . . . 148

14.2 Integration vs. Outsourcing in Industry Equilibrium: Grossman and

Helpman (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

15 The Property-Rights Approach in International Trade (I): Antràs

(2003a) 165

16 The Property-Rights Approach in International Trade (II): Antràs

(2003b) and Antràs and Helpman (2004) 182