Essays on international trade and investment

This dissertation consists of three essays on international trade and investment. In the first essay, I study how cross-country differences in labor market institutions shape the pattern of international trade with a focus on workers' skill acquisition. I develop an open-economy model in which workers undertake non-contractible activities to acquire firm-specific skills on the job. I show that protective labor laws, by increasing workers' bargaining power, induce workers to acquire more firm-specific skills relative to general skills. When sectors differ in the dependence on firm-specific skills in production, workers' investment decisions turn a country's labor laws into a source of comparative advantage. Specifically, the model predicts that countries with more protective labor laws export relatively more in firm-specific skill-intensive sectors. To test these hypotheses, I construct sector measures of firm-specific skill intensity using estimated returns to firm tenure in the U.S. over 1985-1993. Using these measures and a cross-country, cross-sector data set of 84 countries in 1995, I find support for the theoretical predictions. In the second essay, I use a firm-level panel data set of 90,000 Chinese manufacturing firms over the period of 1998-2001 to examine whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms in the same sector (horizontal spillovers), and in sectors supplying intermediate inputs to foreign affiliates (vertical spillovers through backward linkages). I find evidence of negative horizontal spillovers. While I find no evidence of vertical spillovers at the national level, domestic input suppliers' productivity growth decreases with the foreign presence in their downstream sectors in the same province.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Tang, Heiwai

Advisor dc:contributor.advisor

• Oliver J. Blanchard, Pol Antràs and Roberto Rigobón.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/43783

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/43783