Essays in International Trade

In my PhD thesis I study three factors that shape international trade patterns: technological differences across countries, entry barriers in the form of fixed costs and international migration.  The first chapter analyses whether technology differences across countries can explain specialization patterns in international trade. To measure specialization, I compute concentration indexes for the value of exports and imports and decomposes the overall concentration into the extensive product margin (number of products traded) and intensive product margin (volume of products traded). The results show that exports are more concentrated than imports, specialization occurs mainly in the volume of trade and larger economies have more diversified exports and imports because they trade more products. I then evaluate the ability of the Eaton-Kortum model, the workhorse model of Ricardian trade theory, to account for the observed facts. The results show that technology-induced specialization through comparative advantage can explain the qualitative and quantitative facts. The key determinants of specialization are the degree of comparative advantage, the elasticity of substitution and geography.  Based on the relationship between entry and market size, the second chapter evaluates whether fixed costs are at the firm or at the product level. Within an empirical framework, I argue that fixed costs at the firm level induce a cost advantage for multi-product firms and international trade will be characterized by few firms selling many products. On the other hand, if fixed costs are at the product level, product entry is accompanied with lots of firms entry and international trade will be characterized by many firms selling different varieties of the same product. Using detailed product level data from 40 exporting countries to 180 destination markets, the results indicate that entry barriers operate at the product level. The key implication of the product fixed cost is that the firm that pays the fixed cost creates a positive externality that lowers entry costs for rival exporters and increases firm entry. Looking at firm entry within products across time and destinations, I find evidence consistent with these spillover effects. Combined these results have important implications for the effects of trade policy on market structure and on the resulting gains from trade in the exporting as well as in the importing country.   The third chapter considers the role of migration in facilitating international trade. Immigrants can increase international trade by shifting preferences towards the goods of their country of origin and by reducing bilateral transaction costs. Using geographical variations across US states for the period 1970 to 2005, we quantify the impact of immigrants on intermediate goods imports. We address endogeneity and reverse causality - which arises if migration from a country of origin to a US state is driven by trade opportunities between the two locations - by exploiting the exogenous allocation of refugees within the US refugee resettlement program. Our results are robust to an alternative identification strategy, based on the large influx of Central American immigrants to the United States after hurricane Mitch. We find that a 10 percent increase in recent immigrants to a given US state raises intermediate imports from those immigrants' country of origin by 1.5 percent.

Keyphrases: Migration, Fixed costs, Spillovers, Market size, Ricardian trade theory, Export concentration, Import concentration, Refugees