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Technology is a key determinant of comparative advantage among nations. As information technology improves and the nations of the world become economically integrated, concern arises over the dissipation of high-income economies' technological advantage. The three essays in this dissertation explore the trade and technology relationship, which is essential to economic growth in both high-and low-income nations. The first essay employs a monopolistic competition framework to investigate the effects -- on each country's relative wages, share of global markets, and welfare -- of the productivity convergence between a technological leader and follower. Results indicate technological convergence improves the follower's competitiveness at the expense of the leader's. Nevertheless, the leader's welfare improves unambiguously on account of the increase in its terms of trade, while the follower's welfare changes in a direction depending on the relative strength of convergence's income and terms-of-trade effects. We use data from 17 food industries in 30 countries, 1993-2001, to test these analytical predictions. Convergence has lifted followers' income and global value-added share. Followers' welfare has risen since convergence's income improvement has outweighed its terms-of-trade deterioration. Simultaneously, leaders' welfare has improved in response to their improved terms of trade. The second essay employs data from 35 countries in 128 ISIC 4-digit manufacturing industries, 1993 - 2001, to test the empirical validity of these same hypotheses for the international manufacturing sector. We find that, just as in the food sector, convergence improves followers' welfare through its positive income effects. However, we do not find empirical evidence of convergence's terms-of-trade effects. The third essay examines trade liberalization's effects on the geographical distribution of productivity, and consequent cross-country resource and market-share allocations, of five processed food industries. We find that the mean and other quantiles of the global productivity distribution shift to the right as international trade liberalizes. The latter result implies that resources are reallocated toward countries with faster productivity growth. The three essays jointly highlight the important influence of global integration and technological convergence on nations' economic growth and well-being. However, policies promoting integration and convergence should pay attention to the consequent intra-country redistribution of income between producers and consumers.
In recent years, economists have become increasingly concerned with the economic effects of automation. Robots and artificial intelligence have become fixtures of modern production, transforming the landscape of labor markets and reshaping patterns of international trade. This dissertation explores the economic changes brought about by these new technologies.The first essay provides a theoretical framework for understanding how automation in industrialized countries in the global North affects trade with developing countries in the global South. I show that automation can lead trading partners to change the mix of products they export and import. For example, as the stock of automatable capital increases in the global North, rich countries reshore production of traditionally labor-intensive goods. I also show that, in the context of automation, trade restrictions aimed at protecting labor-intensive industries can backfire. This is because trade restrictions protect domestic industries from foreign competition but do not protect domestic workers from competition with machines. Reducing the scale of production through a reduction in the size of the market exacerbates worker-machine competition which reduces the economic welfare of low-skilled workers.The second essay offers empirical support for the reshoring hypothesis. Using an exposure model, I partition the US into disjoint local labor markets which each differ in terms of exposure to automation. Using demographic data from the Census and American Community Survey, data on occupation characteristics from O*NET, and export data from the Census, I find that local labor markets that were historically more exposed to automation experienced larger increases in export growth relative to their otherwise comparable counterparts with lower levels of automation exposure. While this relationship is economically and statistically significant for horizontal trade movements between the US and other rich countries, the effect is largest for vertical trade between the US and lower-middle income countries like China. This suggests that automation has changed traditional patterns of comparative advantage between economies in the global North and those in the global South.The last essay looks at the effect of automation on the gender wage gap. As in the second essay, the unit of analysis is the local labor market. Using labor market data from the Census and automation data from O*NET, I find suggestive evidence that automation has reduced the wage gap between men and women. However, this effect is primarily relegated to the market for skilled labor. I find that the reduction in the pay differentials by gender is concentrated among workers with college degrees and find little change in the gender wage gap among workers without college degrees.
In Chapter 2, we focus on a trust policy that mitigates inefficiencies arising from asymmetric information. Traditionally, some markets rely on government interventions, while others rely on reputation systems, warranties, or guarantees. This paper explores the impact of two mechanisms, namely reputation badges and buyer protection programs, and their interaction on eBay's marketplace. Adding buyer protection reduces the premium for the reputation badge and increases efficiency in the marketplace. These efficiency gains are achieved by reducing moral hazard through an increase in sellers' quality and by reducing adverse selection through a higher exit rate for low-quality sellers. Our estimates suggest buyer protection increases the total welfare by 2.9%.
I explore the implications of an increasingly integrated world economy on production patterns, levels of innovation activity and technology diffusion, and welfare across countries in a series of three essays. First, I analyse the gains from openness to international trade and multinational production (MP) across countries in a general equilibrium framework where innovation activity and technology are endogenously determined. The gains from openness to trade and MP implied by the calibrated model are in general much larger than the gains previously reported in the literature, reflecting productivity gains from inward MP, additional profits to multinationals and their affiliates around the world from outward MP, and the benefits of specialisation across production and research activities. Second, I examine the role of international trade in spreading the benefits of technology embodied in machinery and equipment around the world and the contribution of different country characteristics that promote or inhibit these benefits. The results explain why the International Comparison Program's data on equipment prices tend not to fall with levels of development across countries. Third, I examine the empirical relevance of Rybczynski effects, skills biased technical change, and increased global production sharing in explaining Israel's adjustment to immigration of Russian Jews in the 1990s. My findings provide new evidence that all three mechanisms played an important role in Israel's adjustment. The conclusions of this thesis suggest that the gains from participating in a global economy are potentially large but depend in large part on the extent to which the benefits of technology are spread around the world, which in turn depends on geography and other country characteristics. -- provided by Candidate.
The essays in this book explore the forces behind modern economic growth and, in particular, the causes of the extraordinary surge of growth since the Second World War. The introductory essay is an extended treatment of the current views of economists on the growth process and its causes. Other essays consider the contributions of capital formation, education, and the changing character of industries and occupations. These essays disclose the central role of technological progress, take up the relations of science, technology, and business, and discuss the conditions that make for investment in research and the widespread exploitation of new knowledge. They show how Japan and Europe had an unusual opportunity after the war to advance rapidly by following in paths of technology and industrial organization pursued earlier by the United States, and how a remarkable set of circumstances and policies governing trade, investment, population migration, and money worked together to sustain rapid and concerted growth for many years.
In the first chapter of this dissertation (joint with Esteban M ndez-Chac n), we study the short- and long-run effects of large firms on economic development. To do so, we use evidence from one of the largest multinationals of the 20th Century: The United Fruit Company (UFCo). The firm was given a large land concession in Costa Rica--one of the so-called "Banana Republics"--from 1889 to 1984. Using administrative census data with census-block geo-references from 1973 to 2011, we implement a geographic regression discontinuity (RD) design that exploits a quasi-random assignment of land. We find that the firm had a positive and persistent effect on living standards. Regions within the UFCo were 26% less likely to be poor in 1973 than nearby counterfactual locations, with only 63% of the gap closing over the following 3 decades. Company documents explain that a key concern at the time was to attract and maintain a sizable workforce, which induced the firm to invest heavily in local amenities that likely account for our result. We then build a dynamic spatial model in which a firm's labor market power within a region depends on how mobile workers are across locations and run counterfactual exercises. The model is consistent with observable spatial frictions and the RD estimates, and shows that the firm increases aggregate welfare by 2.9%. This effect is increasing in worker mobility: If workers were half as mobile, the firm would have decreased aggregate welfare by 6%. The model also shows that a local monopsonist compensates workers mostly through local amenities keeping wages low, and leads to higher welfare levels than a counterfactual with perfectly competitive labor markets in all regions. In the second chapter of this dissertation, I study an important question in the field of economic growth and development: How developing countries learn to adopt and use new technologies. In particular, the chapter studies how countries learn from each other through international trade. First, I build a panel of bilateral trade flows between industries in different countries. Matching this panel with data on industry-level productivity, I document how productivity grows systematically faster for countries that trade with partners with better technologies, but that this is reducing the gap between local and foreign productivity. Second, I build a model in which knowledge transfers can occur through imported technology, leading to productivity growth. In my framework, agents have heterogeneous learning abilities: The probability of a producer adopting a technology slightly better than hers is larger than the probability of adopting a much more sophisticated one--the trade-off being that conditional on adoption, more sophisticated technologies lead to higher productivity. I document how the model matches the empirical dependence of productivity growth on productivity gaps across trading partners, and the firm size distribution. The model also highlights how ignoring differences in learning abilities can overestimate the impact of exposure to high-TFP trading partners, leading to suboptimal trade policies. I conclude that developing countries should direct relatively more trade to mid-productive countries--as opposed to very productive ones--to maximize technology transfers and increase growth.
Competition, Efficiency and Welfare contains a collection of papers in honor of Manfred Neumann. This collection was prepared as a tribute to a teacher and scholar, whose accomplishments have enriched various fields of economics. The magnitude of his interests is reflected in the breadth of topics covered in this volume: industrial economics, competition policy and related topics. However, if one unifying principle runs through Manfred Neumann's work, it is the belief in the power of competition. Born on May 16, 1933, Manfred Neumann studied economics at the University of Cologne. He graduated in 1960. In 1969 Manfred Neumann was appointed Professor of Economics at Nürnberg University. He was Dean of the Faculty of Economics and Social Sciences of the University of Erlangen-Nürnberg, President of the European Association for Research in Industrial Economics (EARIE) and Chairman of Industrial Organization Study Group of the Verein für Sozialpolitik. Most of his professional career has been spent at Nürnberg, where he has helped to make the Economic Institute one of the leading research centers in Industrial Organization. He has also been involved in various advisory activities. The volume contains 18 essays. The first twelve are grouped into four categories: Innovation and R&D (Part I), Cartels (Part II), Mergers and Merger Policy (Part III), and Methodological Issues in Industrial Organization (Part IV). These papers fall within the bounds of industrial economics, which has been Manfred Neumann's primary research interest throughout his career. Part V includes two papers on theories of international trade, which has been a recurring topic of interest for Manfred Neumann through the years. The last three papers look at broader policy and macroeconomic issues. Contributors to this volume include Karl Aiginger, David B. Audretsch, Paul A. Geroski, Stephen Martin and Dennis Mueller.
This dissertation includes two chapters on international trade. My research focuses on understanding the welfare implication of processing trade policy--an export promotion policy commonly adopted by developing countries, and quantifying these effects. In chapter 1, I build and structurally estimate a multi-country general equilibrium model, and quantify the impact of processing trade policy on welfare. In chapter 2, I extend the model in chapter 1 into a multi-country growth model with idea diffusion through trade, and the calibrated growth model shows that the welfare implication of processing trade policy is reversed in the presence of global idea diffusion. Chapter 1: Processing Trade and International Trade: Evidence from Chinese FirmsProcessing trade policy is often used by developing countries, and exportvalue-added tax rebate is common for countries at different stages ofeconomic development. I build a multi-country general equilibrium model to investigate these policies. I structurally estimate the model using China's firm-level data, and utilize the additional information from processingtrade to identify the elasticity of substitution. In the counterfactualexercise that China eliminates the duty drawback for processing trade, its exports are reducedby about $20\%$, but welfare is increased by about $4\%$.Chapter 2: Processing Trade and Global Idea DiffusionProcessing trade allows firms to claim an import duty exemption for importedintermediates used to produce exports. I study the welfare implicationof this policy in a multi-country growth model in which ideas diffuse throughtrade. New potential producers continuously arrive in each country, andlearn from all the sellers operating in the country (including foreign sellers).If a country is far from world technology frontier, processing trade affectsthe welfare in the country through a trade-off between the loss of varieties(static losses) and the increase in aggregate productivity (dynamic gains).The calibrated model shows that Chinas welfare decreases by $7.6\%$ if Chinaeliminates the duty drawback for processing trade, and the magnitude of thedynamic gains is about three times larger than that of the static losses.
The two major review essays - Jeffrey James on microelectronic technology and Martin Fransman on biotechnology - assess the impact of these new technologies on production, trade, employment and welfare in developing countries.