Three essays in international trade
This thesis is a collection of three essays in international trade. Chapter 1 explains how firm heterogeneity and market structure can distort the geography of international trade. By considering only the intensive margin of trade, Krugman (1980) predicts that a higher elasticity of substitution between goods magnifies the impact of trade barriers on trade flows. In this chapter, I introduce firm heterogeneity in a simple model of international trade. I prove that the extensive margin, the number of exporters, and intensive margin, the exports per firm, are affected by the elasticity of substitution in exact opposite directions. In sectors with a low elasticity of substitution, the extensive margin is highly sensitive to trade barriers, compared to the intensive margin, and the reverse holds true in sectors with a high elasticity. The extensive margin always dominates, and the predictions of the Krugman model with representative firms are overturned: the impact of trade barriers on trade flows is dampened by the elasticity of substitution, and not magnified. To test the predictions of the model, I estimate gravity equations at the sectoral level. The estimated elasticities of trade flows with respect to trade barriers are systematically distorted by the degree of firm heterogeneity and by market structure.
Alternative title: | 3 essays in international trade |
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Year of publication: |
2005
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Authors: | Chaney, Thomas |
Other Persons: | Xavier Gabaix, Marc Melitz and Daron Acemoglu. (contributor) |
Institutions: | Massachusetts Institute of Technology. Dept. of Economics. (contributor) |
Publisher: |
Massachusetts Institute of Technology |
Saved in:
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