Essays on International Trade

Author:

Salamanca Malagon, Carlos

Graduate Program:

Economics

Degree:

Doctor of Philosophy

Document Type:

Dissertation

Date of Defense:

August 07, 2024

Committee Members:

Barry Ickes, Program Head/Chair
Edward Jaenicke, Outside Unit & Field Member
Kala Krishna, Chair & Dissertation Advisor
Mark Roberts, Major Field Member
Michael Gechter, Major Field Member

Keywords:

International Trade
Rules of Origin
Nonlinear Pricing

Abstract:

% Place abstract below. \vspace{-0.3in} Chapter 1 is based on collaborative work with Kala Krishna, Yuta Suzuki, and Christian Volpe \citep{krishna2021learning}. Meeting Rules of Origin (ROOs) to obtain lower tariffs in a Preferential Trading Area (PTA) is costly both in terms of production costs and fixed documentation costs. Using a model-based approach that corrects for endogeneity and a unique exporter-importer matched transaction-level customs dataset from Latin American countries, we show that preference usage patterns suggest that these fixed costs fall with exporters’ experience in preference utilization, particularly in the same product and with the same partner, indicating both the existence and channel of learning. Exploiting a natural experiment, we also show that newly covered products have much more learning as might be expected. \\ Chapter 2 is based on collaborative work with Yuta Suzuki. We develop and estimate a dynamic structural model of export behavior with a focus on the utilization of preferential trade agreements (PTAs) and the associated rules of origin (ROOs). We model the decision of firms to use PTAs as a function of the fixed costs associated with complying with ROOs, which decrease as firms gain experience. We estimate the model using data on Colombian importers and their transactions with exporters from Argentina and Peru. Our findings indicate that the fixed costs of using PTAs are substantial, particularly for firms with limited experience. However, these costs decrease significantly as firms gain experience, highlighting the importance of learning in utilizing PTAs. We also conduct counterfactual policy experiments to assess the impact of government subsidies on PTA utilization. Our results suggest that subsidizing the first transaction under a PTA can substantially increase utilization and reduce exit rates among exporters and that subsidizing subsequent transactions has limited additional effects. \\ Chapter 3 is based on collaborative work with Kala Krishna, Yuta Suzuki, and Christian Volpe. Using a unique dataset on imports of Colombia from Argentina and Peru, we find clear evidence of quantity discounting, and more so for Argentinian exporters. We find that a 100 \% increase in quantity results in a 7.5\% fall in price for Peruvian exporters and a 16.8\% fall in price for Argentinian ones. We find that quantity discounts are larger for differentiated goods and for importers with a larger network of exporters (where there could be more room for bargaining). In Peru, doubling quantity results in a price fall of 6.6\% assuming the importer has a history of dealing with only one exporter, and it increases to 14.4\% when the importer has dealt with five or more exporters in the past. Similarly, in Argentina, this number for differentiated products ranges from 17.1\% with one exporter to 18.5\% with five or more exporters. Our results challenge the traditional assumption of linear pricing, especially in International Trade. This has widespread implications: for example, the positive correlation between firm size and TFPR would be biased upwards if linear pricing is assumed while quantity discounts prevail.