Three Essays In Empirical International Trade

This thesis consists of three essays about international trade and wage inequality. Essay I characterizes optimal trade and FDI policies in a model with monopolistic competition and firm-level heterogeneity similar to Helpman et al. (2004). I find that both the optimal import tariffs and the optimal FDI subsidies discriminate against the more profitable foreign firms. This is because of the existence of a wedge between the private incentives of exporting and FDI firms, and the incentive of the representative agent. Essay II develops an elementary theory of global supply chains. It considers a world economy with an arbitrary number of countries, one factor of production, a continuum of intermediate goods, and one final good. Production of the final good is sequential and subject to mistakes. In the unique free trade equilibrium, countries with lower probabilities of making mistakes at all stages specialize in later stages of production. Using this simple theoretical framework, it offers a first look at how vertical specialization shapes the interdependence of nations. Essay III proposes a model that has as ingredients heterogeneity of workers and firms, complementarity between occupations within each firm and complementarity between workers and firms/occupations. The competitive equilibrium features positive assortative matching and leads to both within- and between- firm wage variations. Comparative static results are then derived to generate new insights about changes in these components of wage inequality.

Abstract: My dissertation discusses the extensive and intensive margins of international trade. I investigate this topic using newly available Chinese Customs data and firm-level survey data from 2000 - 2006. These two datasets shed light on China, which is one of the biggest traders in the world, and allow me to test whether trade models motivated by the data of industrialized countries can explain Chinese trade.

Internationalization of the world economy has made trade a key factor in the growth potential of nearly every economy. Hence, economists have become increasingly interested in the determinants of international trade and competitiveness. Empirical Models i

This dissertation explores the economic interactions and outcomes in the nexus of international trade and finance. The entire dissertation is divided into three chapters with each chapter addresses one specific economic problem that roots in the interaction of international trade and finance. In the first chapter, I attempt to draw theoretical implications on two particular questions. First, what is the trade liberalization effect on capital market outcomes? Second, how do trade liberalization and capital market conditions jointly affect labor market outcomes such as income inequality? The objective of this chapter is to integrate both labor market frictions and capital market imperfection into one coherent theoretical framework and study the important interactions of trade liberalization and financial market development, as well as their joint impacts on aggregate income inequality. In the second chapter, I aim to provide both theoretical foundation and empirical evidence in partially explaining country authorities' decisions on financial policies. In the third chapter, [w]e provide a novel way of extracting country-level fundamental news from the international trade network. Specifically, we show that sovereign CDS returns provide value-relevant information that slowly propagates through credit markets reflecting underreaction on a global scale.

This dissertation consists of three essays in international trade. The first chapter analyzes integration strategies of Korean firms that involve producing final products and providing post-production services for serving geographically separate foreign markets: high-income and low-income countries. I present a model in which heterogeneous firms must provide services for products through their subsidiaries in host countries, but can produce output in different locations. The model shows that the firm's equilibrium decision depends on its own productivity level and economic variables that affect production location and providing services. Using plant- and firm-level data of Korean firms, the empirical analysis provides the results that support the model's predictions.