Three Essays In International Trade and Industrial Organization

Open Access
Pehlivan, Ayse Ozgur
Graduate Program:
Doctor of Philosophy
Document Type:
Date of Defense:
May 16, 2011
Committee Members:
  • Quang H Vuong, Dissertation Advisor
  • Quang H Vuong, Committee Chair
  • Isabelle M Perrigne, Committee Member
  • Jonathan W Eaton, Committee Member
  • David Gerard Abler, Committee Member
  • supply function competition
  • technology
  • trade
  • nonparametric identification
  • nonparametric estimation
  • share auctions
This thesis consists of three chapters. Chapter 1: International Trade and Supply Function Competition: Model and Non- parametric Identi…cation (with Quang H.Vuong) This chapter introduces a novel model of international trade in which exporters compete in supply functions/schedules and studies the nonparametric identi…ca- tion of the underlying structure, namely productivity distributions and marginal costs. In recent Ricardian and heterogeneous …rm models of international trade, probabilistic representations of technologies have been very popular. Using a similar setup, we propose a model in which exporters compete in supply func- tions/schedules. Our model reconciles the existence of multiple sellers, multiple prices, and variable markups while also incorporating features such as strategic pricing and incomplete information. Moreover, the probabilistic structure in trade models usually comes with strong parametric assumptions on the productivity dis- tributions (usually assumed to be Fréchet or Pareto) of countries/…rms. Recent studies have shown that gains from trade predictions are very sensitive to these parametrizations. In view of this, our model maintains a flexible structure for productivity distributions and marginal costs. We recover the productivity distri- butions and the marginal cost functions nonparametrically. Our methodology also contributes to the empirical share auction literature by showing that the underly- ing structure is identi…ed nonparametrically even if we do not observe the entire schedules, but only the transaction point instead. Chapter 2: International Trade and Supply Function Competition: An Empirical Application (with Quang H.Vuong) This chapter provides an empirical application of the supply function compe- tition model of international trade that was introduced in the previous chapter. Based on the identi…cation results of the previous chapter, we propose a non- parametric estimation procedure and obtain nonparametric estimates of the pro- ductivity distributions and marginal costs. We apply the model to the German market for manufacturing imports for 1990. Our empirical results do not support the distributional assumptions that are commonly made in the international trade literature such as Fréchet and Pareto. In particular, we …nd that the productivity distributions are not unimodal. Low productivities are more likely to occur as ex- pected, but there is not a single mode. In addition, our results show that markups are not constant across exporters. Chapter 3: Nonparametric Identi…cation of Country-Specifi…c Productivity Distrib- utions in an Eaton-Kortum Framework (with Quang H.Vuong) This chapter studies the nonparametric identi…cation of the country-specifi…c productivity distributions in an Eaton and Kortum (2002) type model where the underlying market structure is still perfect competition. In the supply function competition model which was introduced in the …first two chapters, two major changes (as compared to the Eaton and Kortum (2002) model) were introduced: First, instead of perfect competition, supply function competition was used and second, the parametrizations on the underlying productivity distributions were dropped. Investigating how each change would a¤ect the results of the current literature however was still a question to be answered. This chapter achieves the nonparametric identi…cation of country-specifi…c productivity distributions, which is the fi…rst step in checking the validity of the common distributional assumptions on productivity distributions in the literature and assesing how the results of the current literature change if those are relaxed.