[JOB MARKET PAPER]

We use a unique administrative dataset of Spanish exporters to document the existence of exporters ’ geographical agglomeration by export-destination. We reveal that firms selling to countries with worse business regulations, dissimilar language and different currency tend to cluster significantly more. We then assess the implications of exporters ’ geographical agglomeration for firms ’ behaviour and for the estimated welfare gains from trade. On the one hand, we find that exporters engage in more stable trade relationships with those countries that are the export-destinations of nearby firms. On the other, we introduce agglomeration in a model of international trade a ̀ la Melitz (2003). Using our Spanish firm-level data, we find that relative to a model without agglomeration, accounting for this phenomenon increases by 44 % the elasticity of welfare with respect to fixed trade-costs. ∗We are very grateful to Guillermo Caruana, Rosario Crino ́ and Claudio Michelacci for their constant guidance and help. We are also thankful to Pol Antràs, Manuel Arellano, Stéphane Bonhomme, David Dorn, Manuel Garćıa