Abstract
We distill the main insights from recent trade models on firms' responses to globalisation. Our primary aim is to assess the economic impact and the welfare implications of the resulting reallocation of resources across firms and countries. In so doing, we bring theory into life through the numerical implementation of a theoretical framework calibrated on European data, which encompasses aspects of economic geography, firm heterogeneity, and firms' organisational choices. Our final purpose is to provide a comprehensive background for empirical investigations and to stimulate further theoretical research. © Miroslav N. Jovanović 2011. All rights reserved.