How important are economies of scale in exporting? We argue that firm size cannot be the main
determinant of export status if a model is to be consistent with the observed number and size of
exporters. Instead, we need a lot of variation independent of firm size to reconcile the model with
the data. We show that the augmented model also has markedly different implications regarding the
margin of adjustment in the event of a trade liberalization: most of the adjustment is through the
intensive margin and productivity gains due to reallocation are halved. (JEL: F12)
