Three Essays on International Trade and Development Economics

Abstract

This dissertation consists of three independent essays related to international trade in developing countries. I focus on the context of Colombia in all the essays. Firstly, I analyze how infrastructure is a determinant of comparative advantage. Secondly, I study the economic geography of commodity booms. Lastly, I examine the dynamics of importers after a trade liberalization event.

The first essay examines the effects of infrastructure projects on the composition of the basket of exports. I develop a model of domestic and international trade with different shipping routes and input-output linkages, to study how a large road infrastructure project affects the composition of the basket of exports of Colombia, a country with a historical concentration on commodity exports. I estimate parameters and calibrate the model using customs administrative data, a transportation survey and a unique dataset of geospatial data generated from physical road maps. Results indicate that improving the connectivity of a large manufacturing region to ports reduces Colombia's export concentration on commodity products, thus altering specialization. This suggests that infrastructure development policy could be an effective alternative to existing piecemeal government programs such as subsidies to specific sectors that aim to change comparative advantage.

The second essay studies the short-run spatial economic effects of commodity booms. Using the oil boom across Colombian regions as an example, I provide empirical evidence that input-output linkages, the composition of the local industry and domestic trade costs strongly influence the size and direction of the regional economic impacts of commodity booms. In addition, the transportation costs across different manufacturing goods matter when we measure the impact of commodity booms in the local industries, that is, sectors that produce goods that are difficult to transport due to physical characteristics experience a positive impact during a commodity boom. My results indicate that to generate a more precise picture of the impacts of commodity booms, it is necessary to consider factors related to general equilibrium effects. Specifically, industry linkages, domestic trade costs and the composition of the local industry have the capacity to change the regional economic impacts of commodity booms.

The third essay (joint with Vybhavi Balasundharam) studies the dynamics of importers, and whether these dynamics change after a trade liberalization event. Using detailed customs administrative data we provide evidence of three novel patterns among firms that import: the existence of churning of importers, convergence of new importers with respect to existing ones, and divergence across existing importers. We evaluate whether an FTA is responsible of these patterns and we find that this is not the case. The patterns seem to have specific trends across time, and the FTA does not seem to impact such trends. The results have implications to understand how changes in the composition of imports occur, and our results can help to understand better how imports impact productivity gains.