Structural Change in a Global Economy

Abstract

This dissertation comprises three chapters which consider the macroeconomic and political effects of exposure to international trade. Rodrik (2016) observes that, relative to early industrializers, later industrializers have tended to attain lower peak industry value added and employment shares, and have attained those peak shares at lower levels of development. In Chapter 1, I establish that these differences are primarily driven by differences in the size of the manufacturing sector. These facts are rationalized in an open economy with global productivity dynamics. In an open economy, global productivities are an important determinant of the structural composition of each economy. Relative to early industrializers, later industrializers begin to develop in a world with markedly different global productivities and widespread, ongoing economic growth abroad. Consequently, later industrializers develop facing different relative prices conditional upon the level of development. This leads them to attain lower peak manufacturing value added and employment shares at lower levels of development. In Chapter 2, I document that differences between early and late developers in the extent of industrialization are predominantly due to differences in the growth of the processed metals, machinery and equipment manufacturing industries. Production in these industries is heavily concentrated in a small number of countries which supply these goods to the world. In an open economy model of structural change with hierarchical industrialization, there is minimal growth in these industries in most countries, other than the early industrial nations, since later industrializers develop facing different relative prices, and with different comparative advantage conditional on the level of development. In Chapter 3, coauthored with Vivek Sampathkumar, we investigate the extent to which trade and China are more salient issues in political campaigns in places in the US with greater exposure to Chinese import competition. Trade exposure measures are constructed using gross trade flows and estimates of value added trade flows. We exploit variation across electoral units and across the media markets where television advertising is purchased, and find that trade exposure measures are related to the increased prevalence of advertisements that mention China and associated economic concerns, such as trade or jobs.