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Author
Title Essays on International Trade
URL
Publication Date
Degree PhD
Discipline/Department Economics
Degree Level doctoral
University/Publisher Penn State University
Abstract This dissertation consists of three chapters. Chapter 1 is devoted to a theoretical analysis of the interaction between comparative advantage and international risk sharing in the presence of uninsured total factor productivity shocks (TFP). The overwhelming consensus in the theoretical literature is that access to international risk sharing in the presence of uninsured TFP shocks induces a country to specialize more in its comparative advantage industries. In Chapter 1 of my dissertation I demonstrate that the effect of financial integration on production patterns depends on preferences and on the structure of the variance-covariance matrix of TFP shocks present in the economy. Using a variant of the standard 2x2 Ricardian model with TFP shocks by Helpman and Razin (1978), I show that if TFP shocks affect each industry in all countries the same way, the standard assumption, then financial integration indeed leads to a more specialized production structure. However, if shocks are not correlated across countries and affect all industries in a country the same way, then the effect of financial integration is ambiguous. I also show that in the absence of international risk sharing the Helpman-Razin model generally has (discrete) multiple equilibria - an overlooked phenomenon. I build a framework with a continuum of goods in the spirit of Eaton-Kortum and show how the multiple equilibria can be numerically bounded. Using this framework I explore the welfare effects of financial integration through its impact on the production structure. This work can be seen as a first attempt to bring together the discussion of international risk sharing and trade in the context of quantitative trade models of comparative advantage. Chapter 2 is a joint work with Gary Lyn and Andres Rodriguez-Clare. This Chapter studies the implications for trading economies of industry-level external economies of scale, also known as Marshallian externalities. This fundamental question has received little attention in the recent trade literature because of the large number of equilibria that typically occur in trade models with Marshallian externalities. In this work we build a version of such a model that yields a unique equilibrium and a standard gravity equation. The underlying structure of our model is isomorphic to that of a multi-industry Krugman model of firm-level economies of scale and so our uniqueness result extends to this setting as well. The welfare analysis reveals that if the conditions for uniqueness are satisfied then all countries gain from trade even when the strength of scale economies varies across industries. Moreover, the presence of scale economies tends to decrease the gains from trade but increase the gains from trade liberalization. Chapter 3 is devoted to a theoretical analysis of a model with a nested constant elasticity of substitution utility function and heterogeneous firms involved in price competition. Models of this type have become popular in the international trade literature in recent years. I show the continuity…
Subjects/Keywords comparative advantage; international risk sharing; marshallian externalities; Bertrand competition
Rights Unrestricted
Country of Publication us
Record ID oai:etda.libraries.psu.edu/oai/26224
Repository psu
Date Retrieved
Date Indexed 2017-01-24
Grantor Penn State University

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…from international risk sharing through the feedback on the production structure led to the creation of the first chapter of my dissertation. The help of Felix Tintelnot on the early stages of the work on the first chapter was invaluable. I thank…

…Advantage and International Risk Sharing: Together at Last 1.1 Introduction This paper analyses the interaction between comparative advantage and international risk sharing in the presence of total factor productivity (TFP) shocks. I consider a…

…world economy with multiple countries and multiple industries with country-industry-specific aggregate productivity shocks. International risk sharing allows agents residing in different countries to insure each others risks through financial markets. I…

…use the term “financial integration” to describe the situation of unrestricted international risk sharing between countries. Comparative advantage in this world is defined in the expected terms — by comparing the ratios of expected aggregate…

international risk sharing and 1 comparative advantage in the spirit of Eaton and Kortum (2002), which preserves the effects of the simple model. I use the quantitative model to explore the potential welfare benefits of financial integration. The…

…tight relationship between the central questions of this paper can be seen by highlighting the main features of the existing literature on the topics of international risk sharing and comparative advantage. The international finance literature on the…

…effects of international risk sharing usually considers models with exogenous production structure: either endowment economies or economies where each country produces a unique good. In these models the key role of international risk sharing is to smooth…

…qualitative results on the impact of financial integration on specialization and it lacks empirical assessment of welfare gains from financial integration.3 The current paper speaks to the literature on gains from international risk sharing by combining the…

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