Essays in International Trade
2020-12
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Essays in International Trade
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2020-12
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Chapter 1 is a literature review of heterogeneous firm models in international trade. This review starts with a summary of the models before heterogeneity was introduced to trade models. It then continues to show the evidence that heterogeneity among firms is not only a key aspect of international trade, but also that this key aspect and its effects were not being encapsulated in the economic models at the time. We discuss the models that started including heterogeneity among firms into economic models: mainly, Eaton, Kortum (2002) ,Melitz (2003), Bernard et al. (2003). We show the main impact these papers had in shaping how we evaluate international trade and the effects in the data that these models are able to capture versus those they are unable to capture. I end this literature review by talking about a growing literature which is tariff policy and the effect of heterogeneous firms on tariff policy. Chapter 2 is a paper on tariffs on intermediate goods. Tariffs on intermediate goods have gained popularity around the world over the past decade, peaking with the steel and aluminum tariff proposed by the U.S. in 2018. Previous studies on tariff policies have discussed the effect of tariffs on the global value chain or on the utility of large countries Caliendo and Parro (2015) and Flaaen et al.(2019). However, these studies either investigate the effect of tariffs on final goods or the effect of tariffs on intermediate goods. They do not consider an environment with both intermediate and final goods. This paper studies the relative welfare and productivity effects in an economy with tariffs on intermediate goods versus tariffs on final goods. This paper finds that the effect of an intermediate good tariff is highly influenced by the Armington elasticity of the industry. In industries that have a low Armington elasticity, there is an increase in utility from a 1% tariff on intermediate goods as compared with a tariff on final goods, however, for sectors with high Armington elasticity there is a decrease in utility due to an intermediate good tariff as compared with a tariff on final goods. Chapter 3 is a paper on international trade and the effect it has on wholesale versus customized goods. The differing effect trade has on specialized and wholesale goods is a growing literature headed by Holmes, Stevens (2014). This literature does not take into account firm decision into choosing the specialized sector versus the wholesale sector. Thus they are unable to explain the increase in specialized firm in the US with an increase in wholesale trade. For example the large increase in craft beer in the US after NAFTA. This paper gives theoretical justification for this increase in domestic production of specialized goods, when countries open up to trade. We also show that depending on certain parameters, the expenditure share on specialized goods can increase when a country opens up to trade.
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University of Minnesota Ph.D. dissertation. December 2020. Major: Economics. Advisors: Timothy Kehoe, Manuel Amador. 1 computer file (PDF); ix, 63 pages.
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Kumcu, John. (2020). Essays in International Trade. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/218704.
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