Essays in International Trade and Industrial Organization

CHAPTER 1: Immiserizing Deindustrialization: A Dynamic Trade Model with Credit ConstraintsIn this essay I develop an open economy dynamic model with bequests and credit constraints. The agricultural sector uses only labor, the industrial sector needs an indivisible investment. Under autarky, productive agriculture provides the funds needed for investment in industry and in equilibrium credit constraints are not binding. If agriculture is not sufficiently productive, the price of the industrial good must be high enough to make the industrial sector sustainable.In an open economy, if the country has the comparative advantage in agriculture, deindustrialization may occur over time. Deindustrialization is welfare reducing when the negative wealth distributional effects swamp the gains from trade.CHAPTER 2: Return Policies, Market Outcomes, and Consumer WelfareThe effect of return policies on market outcomes is studied in a model where consumers differ in their valuations of time. Product quality is identified with defect rates. Producers first choose quality and then compete in prices. For given defect rates, allowing returns makes products closer substitutes, enhancing competition and reducing prices. Being closer substitutes makes higher qualities less worthwhile, which reduces quality. While the decrease in quality reduces consumer welfare, the decrease in prices raises it. The latter dominates so that aggregate consumer welfare increases with return policy.CHAPTER 3: Skill Acquisition, Credit Constraints, and TradeThis essay analyzes the role of apprenticeships in overcoming credit constraints that limit the ability of agents to acquire skills. A general equilibrium model is used where the availability of skilled and unskilled labor is endogenously determined. Under the apprenticeship system, trainees can pay for their training by working at below market wages during their apprenticeship. Under the college system, payment must be made up front.In the static model the response of supply to price depends on the number of skilled agents in the economy. If there are relatively many skilled agents, supply can be decreasing in price and multiple equilibria may exist. In steady state such non-monotonicity of supply obtains only in the presence of credit constraints. Finally, opening the economy up to trade could reduce welfare if a country imports the good whose relative price has risen due to trade.