Abstract approved:____________________________________________________

A firm‟s productivity is composed of two parts: pure technical change and location-specific (agglomeration) externalities. Regional productivity is thus an aggregation of productivity of firms producing similar goods and located in a given region. International trade can affect both components of regional productivity. First, trade openness in a closed economy may alter its internal economic geography. Some regions which become more attractive to firms than before gain an advantage over others from integration into global markets. Second, as a competition pressure, trade liberalization forces the least productive firms to exit, resulting in the growth of aggregate productivity in the industry. The three essays presented in this dissertation explore the relationship between international trade and regional productivity in the presence of heterogeneous firms. In the first essay, a theoretical framework is introduced in order to describe how the above two channels, through which trade affects regional productivity, shape a country‟s spatial distribution of productivity. Results show that industries, each having its own cost-minimizing location, can be spatially relocated within a country via heterogeneous trade liberalization across industries. Moreover, trade intensifies localization for each industr