Date of Award

Spring 2021

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

Arkolakis, Costas

Abstract

The first chapter studies the factors that determine the degree of spatial concentration of a country’s population. I investigate the drivers of concentration by adding non-homothetic preferences to a modern quantitative spatial model, obtaining a two-sector spatial model in which concentration depends on trade networks, structural transformation, and location-specific fundamentals (i.e. productivities and amenities). The model delivers an analytical expression decomposing changes in spatial concentration into separate terms that reflect the roles of these three forces. I then bring the model to the data in two steps: first, estimate trade gravity equations to recover year- and sector-specific trade-cost matrices; then calibrate the model to the 2005 global economy (featuring 1611 locations across 192 countries) by finding local fundamentals that rationalize population and income data given the equilibrium equations. I use this calibrated model for counterfactual exercises that clarify the role of trade access on spatial concentration. Results indicate that increasing access to foreign markets reduces concentration in most countries. Finally, I use the model-implied decomposition equation to disentangle the roles of structural transformation, differential trade access, and local fundamentals in accounting for the observed 1990-2015 changes in concentration for 44 countries. The bulk of the variation is explained by local fundamentals, with only 1% accounted for by differential trade access and structural transformation. The second chapter proposes a methodology to estimate the magnitude of non-tariff barriers (NTBs) to international trade using real-world data. I extend a workhorse quantitative trade model to include NTBs in the form of import licenses which are randomly granted to each country’s consumers. In equilibrium, a “price gap” emerges between the average price of imported goods and of domestic goods because import licenses destroy some international transactions, diverting consumers’ purchases towards more expensive domestic varieties. I then propose an approach to estimate the model and recover model-implied NTB measures by solving the equilibrium equation system for unobservable variables (NTBs, productivities, and trade costs) given data on observable variables, including price gaps. Intuitively, the model identifies NTB magnitudes through the size of each country’s average price gap between domestic and imported varieties. Finally, I propose a fixed-effects approach to estimating price gaps for each country by leveraging separate data sources on import prices and “overall” prices. This data is used to estimate a fixed-effects model that yields estimates of country-data source fixed effects. The (exponentiated) cross-data source difference of these fixed effects provides a measure of country-specific price gaps, which can then be directly used in the main methodology to invert the model and obtain NTB measures.

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