Essays in international trade [electronic resource]
Keywords: Economics.

The first chapter of this dissertation asks whether forming a business group enhances the export competitiveness of its member firms through a financial channel. More precisely, I claim that forming a business group lowers default risks by diversifying profit sources across various industries and thus allows its member firms to borrow at lower interest rates; in turn, the member firms export more in intensive and extensive margins. I build a model, derive its theoretical implications, and test these implications with Korean firm-level data against alternative explanations. The empirical results suggest that the financial benefit through diversification plays an important role in Korean business groups' superior export performance. The second chapter, coauthored with Kyle Bagwell, analyzes trade policy in a symmetric, two-country version of the Melitz-Ottaviano (2008) model. Our characterizations are influenced by three driving forces corresponding to the selection effect, the firm-delocation effect, and the entry-externality effect. Starting at global free trade, we show that a country gains from the introduction of (1) a small import tariff; (2) a small export subsidy, if transportation costs are low and the dispersion of productivities is high; and (3) an appropriately combined small increase in its import and export tariffs. The welfare of its trading partner, however, falls in each of these three cases. We also offer characterizations of efficient and Nash trade policies. We find that global free trade is generally not efficient, even within the class of symmetric trade policies; and we establish that the import tariff exceeds the export tariff in a symmetric Nash equilibrium. We also provide conditions under which efficient symmetric trade policies entail a total tariff that is positive but below that in a symmetric Nash equilibrium; and we show that, starting at the symmetric Nash equilibrium, countries can mutually gain by exchanging small reductions in import tariffs, export tariffs or combinations thereof. The last chapter, coauthored with Yong Suk Lee, examines how the uncertainty, that arises when countries vie for political influence via economic sanctions, impacts international trade. By separately examining the threat stages of sanctions from the actual impositions, we distinguish the impacts of political uncertainty on trade from that of actual trade disruption. Using a detailed dataset that identifies the timing of sanction threats and impositions, we construct a monthly panel of US sanction cases and bilateral trade between 1992 and 2005. We find that US sanctions significantly reduce US exports to and imports from target countries during the threat stages. The impacts are larger when the target countries are non-democratic states. Furthermore, sanctions motivated by political causes, e.g., war, weapons proliferation, humanitarian crises, etc., tend to have larger impacts than sanctions caused by economic disputes. Our findings suggest that efforts to politically influence other countries generate substantial uncertainty enough to hinder trade flows between sender and target countries.