Essays in Technology and International Trade

Abstract

In this dissertation I study three different topics in international trade. In the first chapter I develops a multi-country, general equilibrium, semi-endogenous growth model of innovation and trade in which specialization in innovation and production are jointly determined. The distinctive element of the model is the ability of the agents to direct their research efforts to specific goods, in a context of heterogeneous innovation capabilities across countries and contemporaneous decreasing returns to R&D. The model features a two-way relationship between trade and technology absent in standard quantitative Ricardian trade models. I find that endogenous adjustments in technology due to directed research can account for up to 52.8% of the observed variance in comparative advantage in production. In addition, the model suggests that standard Ricardian models overestimate the reductions in real income from increases in trade costs and underestimate the increment in real income due to trade liberalizations.

In the second chapter I develop a general equilibrium model for examining the effects of trade on the wage distribution that emphasizes within-industry reallocation of resources and heterogeneity of firms and workers. The main departure from standard models is the introduction of a production function in which high skill workers have comparative advantage in the production at high productivity firms. The main result is that trade induces a pervasive increase in inequality. The exit of the least productive firms and the selection into trade of the most productive ones induce labor reallocations towards the more productive firms in which workers experience "firm" upgrading driving up the high-to-low wage ratio of any pair of workers.

In the third chapter I develop a multi-good, multi-country, general equilibrium trade model to study the gains from trade-induced specialization in a world with increasing returns to scale driven by the presence of fixed costs and in which, as in the standard Ricardian model, trade is driven by comparative advantage rooted in technological differences across goods and countries. In addition to the standards gains from trade emphasized by the standard Ricardian model, trade-induced specialization brings additional gains associated with the savings of non-production workers in the form of fixed costs.