for their comments and suggestions. We greatly thank Julien Martin for his help with the French data. Zhida Gui and Xiao Ma provided outstanding research assistance. This project has received funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation programme (grant agreement No 715147) and from the French National Research Agency (ANR) as part of the "Investissements d'avenir" program (reference: ANR-10-EQPX-17-Centre d'accès sécurisé aux données-CASD). The empirical analysis with the German data was conducted during visits to the research center of the Deutsche Bundesbank. We gratefully acknowledge the hospitality of the Bundesbank and the access to its Micro-database Direct investment (MiDi). Anna Gumpert gratefully acknowledges the financial support from the Deutsche Forschungsgemeinschaft through CRC TR 190. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We present a dynamic model of trade and MNE activity in which the mode of serving a market depends on the well-known proximity-concentration tradeoff. We show that the option of performing MNE activities in the model produces life-cycle patterns for exporters that differ from those in an export-only model. Calibrating our model to rich firm-level data from France and Norway, our main quantitative finding is that a reduction in trade costs triggers much larger responses in growth rates and exit rates, for young exporters, in the model with MNEs than in the model without MNEs. We also show that the model is largely consistent with a set of new facts on the joint life-cycle dynamic behavior of exporters and MNEs. Terms of use: Documents inJEL-Codes: F100, F200.