Essays on Trade and Growth

Abstract

This dissertation is composed of three essays on international trade and economic growth. The first essay investigates whether the content of what economies export matters for human capital accumulation. I construct a small open economy model and find that expansion of primary exports can harm human capital accumulation if the economy is initially allocating significant resources to primary goods production. Then I test this prediction empirically using Latin American data over the period from 1965 to 2010 and find robust evidence in support of the hypothesis that a shift towards primary exports reduces human capital accumulation. In the second essay, I investigate the effects of gravity variables (distance, common border, colony relationship, free trade agreement, or language) on preference and trade costs. This essay models the imports of the U.S. at the individual good level and uses the three-stage least square regression approach by focusing on the trade elasticities. Using actual data on trade costs, this essay decomposes the overall effects of gravity variables on trade into those through gravity channels: duties/tariffs, transportation costs, and dyadic-preference. The results imply that gravity variables mainly capture the effect of preference rather than trade costs (as implied by the existing literature). In the final essay, I examine the effects of increased demand from China on economic growth of the Latin American and the Caribbean (LAC) countries. This essay views the increased Chinese demand in the early 2000s as a quasi-natural experiment and considers it as a “treatment” to which a part of the LAC region was subjected. I adopt a difference-in-difference framework and find that China's demand did deliver significantly higher growth rates to LAC exporters over the last decade and a half.