Essays in International Trade

Abstract

This dissertation consists of three chapters, and contains analysis of trends in international trade along the spatial and dynamic dimensions. In the first chapter, I review recent papers relevant to my areas of study, and highlight some areas which I believe the recent literature to be overlooking. The second chapter uses a static trade model and 2018 data on a panel of 197 metropolitan statistical areas to estimate import penetration rates for cities across the U.S. Results from this chapter show that more densely populated metropolitan areas are more exposed to foreign imports than cities with a lower population density, but are not necessarily more adversely affected by an increase in tariffs because compared to more spread--out areas they have a greater ability to substitute locally made goods for imported goods. The third chapter is my job--market paper, and constructs a multi-sector dynamic general equilibrium model of trade between the United States and the rest of the world to investigate why the pandemic affected services trade more adversely than goods trade, in contrast to trade patterns during and after the 2008 financial crisis. Different parameters in the model represent the different channels through which trade would have reacted to the two downturns, and I calibrate these values to match trade and gross output data. I find that trade frictions play the biggest role in explaining services trade; decreasing costs of conducting trade in services helped prevent losses in services trade during the financial crisis, while increasing trade frictions decimated services trade during the pandemic. A decline in consumer preferences for goods drove the losses in goods trade during the financial crisis, while the absence of such a decline limited the losses in goods trade during the pandemic. A brief analysis of consumer welfare suggests that policymakers concerned about a pandemic-like situation should focus on reducing barriers to trade rather than stimulating demand.