Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper explores international consumption risk sharing in an open economy macro model with firm heterogeneity and shows that firm entry and the self-selection of more efficient firms into exporting account for better international risk sharing. I show analytically that the conventional unconditional correlation between relative consumption and the real exchange rate is not a good metric for measuring international consumption risk sharing. World trade data covering more than two decades indicate that the extent of international risk sharing is underestimated.