@article {479296, title = {Product Mix and Firm Productivity Responses to Trade Competition}, journal = {The Review of Economics and Statistics}, volume = {103}, number = {5}, year = {2021}, month = {2016}, pages = {874-891}, abstract = {We document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. In response to positive demand shocks,\ those French firms skew their export sales towards their best performing products; and also extend the range of products sold to that market. We develop a theoretical model of multi-product\ firms and derive the specific demand conditions needed to generate these product-mix reallocations. These demand conditions are associated with endogenous price elasticities that satisfy\ Marshall{\textquoteright}s Second Law of Demand (the price elasticity of demand decreases with consumption). Under\ these demand conditions, our theoretical model highlights how the increased competition from demand\ shocks in export markets {\textendash} and the induced product mix reallocations {\textendash} induce productivity changes\ within the firm. We then empirically test for this connection between the demand shocks and the\ productivity of multi-product firms exporting to those destinations. We find that the effect of\ those demand shocks on productivity are substantial {\textendash} and explain an important share of aggregate productivity fluctuations for French manufacturing}, author = {Thierry Mayer and Marc J. Melitz and Gianmarco I.P. Ottaviano} }