Essays in International Trade (Heckscher-Ohlin, Ricardian, Market Power).

Abstract

This thesis is made up of three self-contained essays, each dealing with a particular empirical or theoretical issue in international trade. The topic of the first essay is the empirical relevance of the predictions of the st and ard Heckscher-Ohlin (HO) model of international trade. A Hausman specification test is used to test for the exclusion of relevant information from the factor content version of the HO predictions, and strong evidence of such misspecification is found, leading to a rejection of the HO model as an empirically complete description of trade. Consistent estimates of the parameters of the model are then obtained, and these provide evidence in favor of the empirical relevance of the HO model as a partial description of trade patterns. The second essay is concerned with the development of HO-type predictions in a more general model which allows for, among other things, the possibility of imperfectly competitive markets. The restrictions forthcoming from this model, which characterize the post-trade equilibrium in a distortion-ridden HO world, are of theoretical interest in that they lead to general statements concerning permissible trade patterns, the validity of which depend on little more than the fundamental HO assumption that technology is internationally available. At the same time, these restrictions are of empirical interest, in that they permit tests of the hypothesis of internationally identical technologies in a world of imperfect markets. Such tests should help to shed light on the empirical relevance of the defining characteristics of the HO theory, as well as the importance of the role of imperfect competition in an empirically relevant HO model. The final essay explores the implications of the introduction of imperfectly competitive markets into a Ricardian trade model. Monopolized non-traded intermediate-goods industries are introduced into a continuum-of-goods Ricardian trade model. Within this framework, the implications of upstream market power for the gains from, the pattern of, and terms of trade are explored. Also considered are the welfare implications of technology trade, quotas, and foreign ownership in the presence of this distortion.