Two Essays In International Trade Theory

The essays of this book are contributions to the empirical Literature in International Trade and Public Economics. They deal with the relationship between the structure and quality of the public sector and the process of economic integration. Two of the essays add to the empirical determinants of trade and foreign direct investment (FDI) and to the numerous applications of the theory of government decentralization. Decentralization tends to discourage inward FDI and domestic trade and to increase imports and exports. A third essay focuses on the effect of governments' intangible assets - such as consumer perceptions about countries and products from these countries - on FDI. A country's nation brand is shown to have a significant and large positive effect on investment flows.

This book focuses on the normative side of trade theory and is divided into five parts: * trade under perfect competition; * restricted trade under perfect competition; * trade under imperfect competition and other distortions; * Compensation: lumpsum, non-lumpsum or neither? * International trade

Consisting of 8 essays written between 1938 and 1992, this volume brings together in one place the significant contributions which Arthur 1. Bloomfield - a leading specialist in the field of international economics and especially international finance - has made to the history of international trade theory.

This dissertation consists of two chapters. The first one is an empirical study in international trade which investigates the effect of an intensified competition on the price and quality of traded goods. The second one is a theoretical study in macroeconomics that incorporates the theory of efficiency wage in a competitivesearch equilibrium with adverse selection.Chapter 1: Competing on Price and Quality: Theory and Evidence from Trade DataImport competition induces firms either to reduce their markup, upgrade their quality, or both. Modern models of international trade typically consider one margin of adjustment to explain the consequences of import competition. However, examining U.S. import data suggests that firms actively respond by adjusting bothquality and markup. This paper develops and calibrates a Ricardian model of trade which incorporates the endogenous response of quality and markup to import competition. Countries are heterogeneous both in physical efficiency and quality capability. Firms engage in a two-dimensional Bertrand competition in whichthey simultaneously choose the price and quality of output. Estimation results indicate that developed countries are more productive both in physical and quality production. Moreover, in response to import competition, developed countries mainly upgrade quality, while developing countries mainly reduce the markup. Ignoring the quality channel would underestimate the gains from trade that the U.S. derives with developed countries and overestimate the gains from trade with developing countries. The counterfactual experiment indicates as the U.S. economy grows, it benefits more from free trade with quality-capable countries than with countries which are less capable.Chapter 2: Efficiency Wage, Competitive Search and Adverse SelectionThis paper investigates the theory of efficiency wage (wage per unit of efficiency) in a competitive search equilibrium with adverse selection. Firms post wages. Workers whose efficiency is private information decide where to apply after observing posted wages. A separating equilibrium is characterized. Contrary to the result derived in Weiss (1980), not only unemployment rises in response to a negative shock (e.g., output price fall), but each unit of efficiency is also rewarded less. Moreover, I extend the model to a general equilibrium setting in which the product market is monopolistically competitive. Comparative statics show that moving toward a more competitive market induces an increase in the efficiency wage and a decrease in the output price. However, while the rise in the relative measure of firms to workers lowers the output price, its effect on the efficiency wage is indeterminate.

This book is concerned with the application of economic theory to problems of international economic policy. For most of his life the author has been employed as a national or international official in London and Washington, in makers of economic policy.

The two volumes incorporate major new papers contributed by leading international economists, on a range of topics that reflect the breadth of Professor Lloyd's own distinguished contributions to the field of international trade and policy during a career spanning over four decades.

This volume contains papers on Economic Theory and International Trade: The papers on Economic Theory cover the existence and structure of competitive equilibrium in various settings: non-convexities, non-transitivity of preferences, and absence of differentiability or free-disposal assumptions, the role of the compensating variation as a welfare measure, oligopoly under bounded rationality, and regulation of a public utility. The papers on International Trade offer analyses of the "Dutch disease" or the Atlantic Slave Trade, or treat the influence of economic growth on import demand, the terms of trade, and other economic variables, as well as theoretical and empirical evidence for the validity of the Heckscher-Ohlin model. The papers, rigorous and often requiring mathematical sophistication, variously reflect Trout Rader's work.