Browsing by Subject "Trade"

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The effects of transport infrastructure on regional economic development: A simulated spatial overlapping generations model with heterogenous skill
(Journal of Transport and Land Use, 2012) Tikoudis, Ioannis; Sundberg, Marcus; Karlström, Anders
As a result of public investment, lower freight transport costs tend to translate into lower local price indices and are associated with equilibria characterized by higher output and consumption. In this paper we investigate an additional effect to these trade gains, namely the gains from better spatial matching in the labor market. We simulate a two-region Spatial OLG model in which agents are heterogeneous in terms of skill. Under repeated simulation experiments, we show that, for high household relocation frictions, the possibility of interregional commuting can be seen as an alternative way to realize the potential matching effects. For high levels of skill heterogeneity and a plausible parametric input, a steady state in which labor matching is realized through commuting can be associated with up to 10% higher per capita output, compared to the one with homogenous labor, in which only gains from trade are feasible.
Essays in International Economics and Labor Economics
(2017-08) Viana Costa, Daniela
The three chapters of this dissertation investigate major puzzles in international economics and labor economics. The first chapter investigates the macroeconomic effects of primary commodities trade flows across countries with different export composition. The second chapter studies labor flows of workers with similar skill-level and across countries with similar income. Lastly, the third chapter evaluates the macroeconomic effects of a health policy in the United States. Chapter 1 analyzes how the production and price volatility of primary commodities account for the co-movement between real GDP and terms of trade. Primary commodity exporter countries face large terms of trade fluctuations, largely driven by primary commodity price shocks and amplified by the relative importance of primary commodities in the countries’ exports. In this chapter, I document that an increase in the price of a primary commodity is usually followed by a decrease in terms of trade, defined as the relative price of imports over exports, and an increase in real GDP in these countries. Meanwhile, countries that do not export primary commodities enjoy more stable terms of trade, and their real GDP is positively correlated with terms of trade. Although the literature on primary commodity exporters has focused on developing countries, I show that this relation is independent of a country’s income level. Since standard models are unable to generate real aggregate fluctuations from price shocks if real GDP is correctly measured, this paper identifies a puzzle. I propose a class of mechanisms that is capable of explaining the heterogeneous impact of terms of trade fluctuations across countries. I show that a possible resolution is to incorporate the presence of idle resources and a production cost externality in the primary commodity producing sector in order to connect terms of trade fluctuations to real GDP fluctuations. When subjected to a primary commodity price shock, the model successfully accounts for the behavior of terms of trade and its relation to real GDP for different export compositions. Chapter 2, joint work with Maria Jose Rodriguez Garcia and Rocio Madera, revisits empirical evidence on migration within the European Union-15, disaggregated by occupation. We find that workers move to countries where their type is relatively more abundant among natives. This is at odds with traditional models of migration. We develop a model with external economies of scale that generates an agglomeration force in high-educated labor. Our main result is that a country that is relatively abundant in highly educated labor force will attract foreign labor of the same type. We argue this type of model is more suitable to analyze migration flows between countries of similar income level. Finally, Chapter 3, joint with Juan Carlos Conesa, Parisa Kamali, Timothy Kehoe, Vegard Nygard, Gajendran Raveendranathan, and Akshar Saxena, develops an overlapping generations model to study the macroeconomic effects of an unexpected elimination of Medicare. We find that a large share of the elderly respond by substituting Medicaid for Medicare. Consequently, the government saves only 46 cents for every dollar cut in Medicare spending. We argue that a comparison of steady states is insufficient to evaluate the welfare effects of the reform. In particular, we find lower ex-ante welfare gains from eliminating Medicare when we account for the costs of transition. Lastly, we find that a majority of the current population benefits from the reform but that aggregate welfare, measured as the dollar value of the sum of wealth equivalent variations, is higher with Medicare.
Essays in international trade and development
(2014-07) Maio, Michael
In the fields of international trade and economic development, the behaviors of individual firms are often at the center of attention. What unites the essays in this thesis is their focus on studying the aggregate effects of individual firm decisions. Chapter 2 demonstrates that pressure from foreign competition can reduce managerial slack in domestic firms, and that this was a substantial source of productivity gains in Chile following the country's unilateral trade liberalization in the 1970s. Chapter 3 demonstrates theoretically how firms' choices of organizational structure lead to the high skill premium seen among large firms. Finally, in Chapter 4, I show that in an environment where firm market power differs across industries, firm technological upgrading decisions amplify market distortions and increase allocative inefficiency.
Essays in International Trade.
(2012-07) Pieters, Gina Christelle
Essays on International Trade, Inequality, and Fiscal Policies
(2023-04) Siameh, Celestine
This dissertation consists of two distinct chapters, studying the impact of geopolitical tensions on International Trade; and the connection between fiscal policies and inequality. The current state of geopolitical tensions is on the rise, and this has caused a significant decline in the global economy, particularly in international trade and finance. Geopolitical tensions refer to a wide range of political issues between two or more countries that induce tension and unrest, ranging from military conflict to climate change, the USA-China trade war, and Brexit. For this reason, one of the major drivers of trade policy has progressively been geopolitical conflicts. The first chapter of my dissertation provides research-driven facts and valuable contributions toward answering questions on how geopolitical tension, like Brexit, affects trade policies and global trade. This chapter studies the effect of Brexit due to trade policy shock not limited to only the United Kingdom (UK) and the European Union (EU), but with a much focus on third countries that have the UK as their major trading partner. I built a multi- country multi-sector general equilibrium Armington model with trade policy shock that features input-output linkage. Then, I calibrated this model to match the 2015 Eora multi-region input-output data. I then quantify the overall impact of Brexit by comparing the calibrated model with five different potential post-Brexit scenarios that may occur sometime in the future due to changes in trade costs. The findings show that Brexit affects other countries’ welfare, trade, and production patterns besides the UK and the EU. But the magnitude of these effects may depend on the type of trade agreement the UK agrees on with these other countries. Economic inequality is one of the severest problems in the 21st century, with significant long-term and unexpected existential implications. It has long been recognized as one of the biggest threats to the development and performance of the global economy. Fiscal policy is the most powerful tool governments use in addressing high levels of inequality. This is because it affects individual consumption directly through taxes and transfers and indirectly via other means, such as providing public goods, incentives for work, etc. In the second chapter of my dissertation, I provide empirical evidence on how fiscal policies like universal basic income (UBI), targeted cash transfers, and progressive taxation can reduce income inequality in South Africa. I compare the magnitude by which UBI versus TCT funded through progressive taxation can reduce income inequality in South Africa. The results reveal that a UBI or a TCT implemented alongside progressive taxation will reduce income inequality significantly; overall, TCT reduces inequality more than UBI.
Essays on structural change, trade, and development.
(2009-05) Bermudez, Miguel Fernando Ricaurte
The essays in this dissertation employ models of heterogeneous agents or firms to focus on these two aggregate-level issues: (1) structural change and labor market outcomes, and (2) trade and foreign direct investment. Chapter 1 surveys the literature on industrial and sectoral wage differentials. It begins with a review of the empirical evidence and methods to estimate wage differences. Later, it shows estimates of these differentials for the United States using Current Population Survey (CPS) data from 1968 to 2008. The presence of interindustry wage differentials is reported for a number of different specifications. A key finding is that while wage differentials have monotonically decreased for male workers over the period analyzed, the inclusion of female workers disrupts this trend. Chapter 2 studies the reasons why services became the dominant sector in industrialized economies. I argue that institutional differences which affect the degree of competition in labor and goods markets explain: (a) the rise in the service sector share of output and employment, (b) international differences in sectoral structure, and (c) changes in relative sectoral wages. I use evidence on market imperfections to calibrate a two-sector model where household unions bargain with firms for wages. The least competitive sector pays higher wages, and employment is restricted accordingly. The model produces time series consistent with the service revolution as it happened in the United States and European economies between 1950 and 2000. The model's contribution is to offer an explanation for relative wage differences, in the context of structural change. In particular, while generating changes in shares of output and employment, the model offers an explanation for relative wage differences, which the standard literature misses. Chapter 3 (co-authored with Katherine Lande-Schmeiser) studies the striking differences in industry level data on ratios of exports to sales of foreign affiliates (i.e., FDI sales). We determine what is needed to endogenously generate this pattern of export and FDI sales. By calibrating a model of monopolistic competitive firms, we find that tradability of goods is not enough to capture the observed sectoral differences, as is commonly assumed. We explore variants of the model and show that sector-specific taxes on multinationals and home bias allow us to replicate these differences.
A framework for the evaluation of strategies to reduce risk of foot and mouth disease transmission associated with the trade of beef from East African cattle systems: a progressive and participatory approach
(2021-09) Adamchick, Julie
granularity needed in places that tend to have diverse and informal value chains, and b) tapping into unwritten local knowledge / subject matter expertise in a way that generated credible information in a format that can be used for quantitative analysis. The dual training-research activity was also a beneficial experience for participants to model and analyze a problem and system from their professional work. The second aim was to estimate the probability (risk) of FMD at slaughter under current conditions -- the baseline risk. This required quantifying input values and distributions for the variables identified in aim one and translating the conceptual relationships into a probabilistic mathematical model. The risk estimates and sensitivity analyses provided insight about influential factors that could be leveraged to lower the probability of FMD among beef cattle at slaughter from select populations. The third and final aim was to evaluate the cost-effectiveness of possible interventions that could reduce risk in specific value chains. Scenarios were generated using the insights from aim two and compared based on estimated costs and level of risk expected to achieve. This provided insight about specific steps that could be taken as well as a more general gradient of what scale of risk reduction might be expected from a given investment. This information can be combined with information about benefits, limitations, and tradeoffs to support decisions about investments related to FMD control and ambitions for international trade. The output and process of this work provide useful contributions to improve decision-making regarding investments for animal health and trade in regions with endemic trade-sensitive diseases. In Kenya, a feedlot-focused, abattoir-partnered approach may reach the lowest achievable risk. Specific opportunities need to be evaluated in terms of the capacity of necessary stakeholders, cost of sanitary and traceability investments, costs of production, and competitiveness of the resulting product. In both Kenya and Uganda, regionally-focused investments that combined livestock identification and traceability systems with vaccination among willing producers in partnership with an ambitious export abattoir improve FMD control and animal health while reducing risk in the product produced and taking steps toward foundational traceability and disease control capacity. The framework of incremental progress with a focus on risk of the final commodity complements the Progressive Control Pathway for FMD, providing a way to benchmark slow and steady forward motion, and should be used to evaluate disease control and SPS interventions that intend to achieve market access. Participatory approaches that embed data collection for decision analysis into training opportunities for local professionals are a rich way to improve the quality of data and analysis while also building capacity of participants to appreciate the complexity of systems in which they work and the value of analytical approaches to decision-making. Key findings from each chapter: • Aim 1 (chapter 3): o Risk processes differ between management systems, with an especially clear delineation in Kenya between agro-pastoral/pastoral and ranching/feedlot system groups-- highlighting the important interactions between management factors and health or risk dynamics. o FMD infection and sale for slaughter are not always independent events for cattle in Kenya and Uganda, suggesting it would be judicious to characterize the relationship between sale and disease of cattle in the population of study when examining the movement or sale of animals in endemic environments. o The motivations and actions of value chain actors influence the ultimate risk level in a product, demonstrated through the need to include a distinct event for whether or not a disease event is reported after a positive diagnosis. • Aim 2 (chapter 4): o The overall risk of FMD infection at slaughter was substantially lower for cattle originating from Kenyan feedlots and ranches compared to the other six systems evaluated. o In Uganda, semi-intensive and ranching systems showed the potential to reach similarly low risk levels if able to severely limit the exposure to new infections after leaving the herd. o Reduction or elimination of commingling before slaughter was the most effective intervention to reduce risk of infection at slaughter for most systems. o For Kenyan ranches, the detection and removal of infected animals was identified as a potentially important point for intervention. • Aim 3 (chapter 5): o Preventive mass vaccination was the least cost-effective strategy evaluated, even for a relatively small region. It would require a relatively high investment for not the best return with many obstacles on the path, and may not be an advisable strategy especially for the purpose of targeting export opportunities. o Strategies that involved voluntary rather than compulsory participation had more favorable cost-effectiveness ratios. o The greatest reduction in risk at the lowest cost was obtained through a voluntary program that combined a livestock ID and traceability system with biannual preventive vaccination and a premium price at slaughter for participants.
Movement of heterogeneous goods and people.
(2009-08) Rolleigh, Michael M
Applied General Equilibrium models of trade failed to predict the sectoral changes in trade volumes following the Canada-US Free Trade Agreement. These models utilized a representative firm framework and used econometric estimates for the elasticities of substitution between home and foreign goods. I take a different approach on both fronts, modeling plants as heterogeneous and calibrating the elasticities to match estimated markups in each sector. I introduce these features by adapting a \citeasnoun{hop92} model of plant entry and exit and embed this in a multisector trade model. I calibrate the model using trade data between the United States and Canada before their Free Trade Agreement and evaluate the model's performance using later data. I find that calibrating the elasticities to markups improves the fit between model predictions an d data significantly, from weighted correlations which are negative to values of 0.36. Incorporating plant heterogeneity and industrial data improves the weighted correlation to 0.77. After tax wages differ considerably across countries, providing strong economic incentives for individuals to migrate. Increasing political integration and regional trade agreements facilitate international labor mobility, making these economic motives more important relative to the costs of migration. I undertake an empirical analysis using economic incentives to explain the migration of college-educated Canadian workers to the United States in the 1980 to 2000 period. Young workers migrated at a rate over 10 percent during this period. I develop an overlapping generations model of migration with heterogenous agents and calibrate the model to match the total flow of young, college-educated Canadian workers to the US from 1980 to 1990. I verify the calibration by comparing migration predicted by the model to the actual migration of groups not used in the calibration. I use the calibrated model to perform two policy experiments, income tax harmonization and wage equalization. I find that tax harmonization only reduces overall migration by 30 percent, with large reductions in the migration of workers in the middle of the income distribution. Due to the large US wage premium for highly skilled workers, the migration rate for the top quintile of workers declines only slightly. This indicates that the US premium for skilled workers contributes more to migration flows than the varying tax codes.
On the Predictability of Trade and Growth
(2015-08) Rossbach, Jack
This thesis is composed of three chapters, which are tied together by their focus on discussing factors that affect our ability to predict changes in international trade and economic growth. The first chapter theoretically and quantitatively evaluates the hypothesis that, due to the existence of large firms (granularity), idiosyncratic shocks to individual firms can lead to significant variation in the growth of countries. I embed granularity, through finiteness in the set of firms, in a general equilibrium environment featuring monopolistic competition, growth, and international trade. Firm productivities grow according to idiosyncratic productivity shocks, which obey a Gibrat's law proportional growth process, and are the only source of growth in the model. I derive an approximate analytic mapping for the standard deviation of GDP growth in this framework, which is non-zero due to granularity. This mapping depends on only a few key parameters, which I estimate for a wide-range of countries using firm-level micro data. My results indicate that idiosyncratic shocks to firms can play a significant role in generating both short-run macroeconomic fluctuations and variation in longer-run growth trends, particularly for countries that engage heavily in international trade. Empirically, I show that the model does well in matching relative differences in GDP volatility across OECD countries. The second chapter discusses the granular hypothesis and the importance of Pareto tails in generating aggregate uncertainty and instability due violations of the Central Limit Theorem. I argue that the importance of Pareto tails has been significantly overstated and that significant aggregate uncertainty can arise even in the cases where the Central Limit Theorem holds. I revisit the debate on the distribution of firm sizes and show that, when appropriate statistical methods are used, there is significant variation across countries in whether the distribution of firm sizes follows a Pareto distribution or a lognormal distribution. Despite this variation, I show that these differences are largely irrelevant in determining how much aggregate uncertainty we can expect to arise due to granularity, indicating that the presence of Pareto tails is largely irrelevant and that the pathways through which microeconomic heterogeneity can lead to aggregate uncertainty and instability are more general than previously thought. The third chapter, joint work with Timothy J. Kehoe and Kim J. Ruhl, develops a methodology for predicting the impact of trade liberalization on exports by industry (3-digit ISIC) based on the pre-liberalization distribution of exports by product (5-digit SITC). We evaluate the ability of our methodology to account for the industry-level variation in export growth by using our model to predict � the growth in industry trade from the North American Free Trade Agreement (NAFTA). We show that our method performs significantly better than the applied general equilibrium models originally used for the policy evaluation of NAFTA. We find that the most important products in our analysis are not the ones with zero pre-liberalization trade, but those with positive, yet small amounts of pre-liberalization trade.
Technology, ecology and agricultural trade
(2013-12) Heerman, Kari E.R.
I present a methodology for parameterizing and solving a probabilistic Ricardian model with two tradable sectors based on Eaton and Kortum (2002), henceforth EK. I make two changes that generate correlation in product-specific agricultural comparative advantage across agro-ecologically similar countries and deliver trade elasticities that are increasing in this correlation. First, I add product heterogeneity stemming from agro-ecological characteristics to the independently distributed productivity differences in production technology advanced by EK. Second, I allow trade costs to vary across products. As in EK, I estimate trade costs using bilateral trade flow data. However, to account for the additional heterogeneity, I use the simulated method of moments estimator pioneered by Berry, Levinsohn and Pakes (1995). The modified model successfully generates large differences in an exporter's elasticity with respect to its close competitors versus those that produce a very different set of agricultural products. This produces substantial differences in the model's predictions for changes to production and trade patterns in response to agricultural liberalization compared to those predicted by EK.
Trade flow of U.S. recalled consumer products: a gravity model analysis
(2014-09) Lindgren, Brian James Swanson
This paper examines the hypothesis that the trade flow of recalled products and harm caused by recalled products will conform to economic theory in a similar way as the flow of goods in general. A Bergstrand-based gravity model is used in the analysis. My application uses a novel data set that includes measures of U.S. consumer product recalls from 2006 and 2007. The results of the analysis show that the flow of recalled goods corresponds to theory. The type of consumer products imported into the U.S., as well as those later recalled, are found to tend to be labor intensive. Better exporting country institutions corresponded to a relatively greater amount of goods later recalled.

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