Abstract
This paper presents an endogenous growth model of product variety expansion. I study the effect of stochastic fixed costs to trade on the productivity distribution of firms and their entry and exit into home and foreign markets. There is evidence of a very short median duration of exporters' presence in foreign markets. Only about twenty percent of exporters continue selling abroad five years after they have entered the foreign market according to Besedes and Prusa (2006). They also show that the conditional probability of exit decreases with time. The current paper presents the first growth model that accounts for this evidence. The firm exit rate is endogenous and decreasing with time. It results from a series of stochastic fixed costs firms face after entering a market.