Theses and Dissertations from UMD
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New submissions to the thesis/dissertation collections are added automatically as they are received from the Graduate School. Currently, the Graduate School deposits all theses and dissertations from a given semester after the official graduation date. This means that there may be up to a 4 month delay in the appearance of a give thesis/dissertation in DRUM
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Item Trade Policy Shocks, U.S. Imports and Consumer Prices(2020) Li, Lerong; Limao, Nuno; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)How do trade policy shocks affect import and consumer prices? How does the impact on prices vary across consumers? Answers to these questions would help us better understand the transmission mechanism of trade policy shock and its implications for consumer welfare. In my dissertation, I provide both theoretical and empirical evidence to these questions. The first chapter examines the pass-through of import prices into consumer prices and the welfare implications of trade policy shocks. Using a novel dataset with both US import prices and barcode-level consumer prices, I find that the pass-through of import prices to consumer prices is incomplete: a 1% increase in import prices leads to a 0.3 to 0.4% increase in consumer prices. To explain these findings, I build on Burstein and Gopinath (2014) to model the retail margin with variable markups. I show that the pass-through rate depends on the magnitude of the distribution margin and the markup elasticity. In the second chapter, I extend the theoretical framework to explore the heterogeneity in pass-through rates across consumers. I show that a differential pass-through arises through two channels. The first one captures the fact that the pass-through rate varies across retail outlets for the same variety and the second channel focuses on the different expenditure shares across varieties with heterogeneous pass-through rates. Exploiting the rich demographic information in Nielsen barcode data, I find that the pass-through rate is higher for consumers with lower income and in markets with higher retail industry competition. By decomposing the consumer-specific price index, I show that the differential pass-through rates are largely driven by the differences in expenditure shares across varieties. I then conduct a quantitative exercise and show that the consumer prices of affected goods would increase 1-2% on average in response to a 25% tariff on consumer goods from China. The increases in prices are 50% higher for lower-income and higher for consumers living in big cities of the Northeast region and the West Coast. The final chapter investigates the effect of trade policy uncertainty on US imports from China during the trade war episode. By comparing the differences in imports before and after the announcement of tariffs across products, I find that the decline in imports after tariff announcement is larger for products with a larger increase in uncertainty (risk), which suggests uncertainty reduces imports. Furthermore, I find the intensive margin, the adjustment within HS10 products, plays a more important role in reducing imports. There is no significant difference in entry and exit rates across products with different changes in risk.Item Trade Policy and Industrial Concentration(2020) Graziano, Alejandro Gustavo; Limão, Nuno; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)I examine the interrelationship between industrial concentration, the CES industry price index and trade policy when a subset of firms in the market takes the effect of their decisions on industry aggregates into account. In the first chapter, I develop a hybrid model that augments the standard monopolistic competition approach in the international trade literature to include an oligopolistic margin: a set of foreign and domestic heterogeneous granular firms competing in quantities. This margin predicts novel effects of trade liberalization on trade, consumer welfare, and industrial concentration. Specifically, trade liberalization generates lower consumer gains when foreign firms are more concentrated than domestic, and higher domestic industrial concentration of granular firms. In the second chapter, I study the implications of hybrid competition for the gravity equation. I show that the trade cost elasticity is attenuated by foreign firm concentration and I test the novel oligopolistic margin using diff-in-diff variation from trade policy changes in Colombia. I find robust evidence for this margin. I also show that the aggregate impact of trade liberalization can be substantially reduced by oligopolistic behavior. Moreover, foreign concentration heterogeneity across origin countries suggests a highly heterogeneous impact of trade liberalization: imports from countries in the top decile of concentration had 13 log points lower growth on average than imports from countries in the bottom decile. In the third chapter, I explore the implications of the hybrid model when there is trade policy uncertainty. When firms are uncertain about future tariffs and exporting involves sunk investments, the value of waiting increases. In the setting I propose, potential entrants also consider the strategic reaction of oligopolistic competitors: when domestic granular firms are highly concentrated, the impact of trade policy uncertainty on foreign entry is mitigated since the eventual increase in tariffs is predicted to be partially offset by an increase in domestic markups. When foreign granular exporters are highly concentrated, the impact is amplified since the increase in tariffs is predicted to not be fully passed to the price index. I discuss an empirical application in the context of Brexit uncertainty and potential ways forward.Item Essays in Trade and Uncertainty(2015) Carballo, Jeronimo Rafael; Limao, Nuno; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Firms face uncertainty on many different dimensions: demand level, productivity and input prices, taxes and regulations. Furthermore, some argue that uncertainty is higher in recessions (cf. Bloom et al. (2012)) and one of the causes of the slow recovery during the recent Great Recession (cf. Stock and Watson (2012) and Baker et al. (2012)). However, most trade models assume uncertainty away by considering a deterministic framework or introduce uncertainty in a very limited way. In this dissertation, I argue that uncertainty can be particularly important for two topics in international trade: (i) firms’ global sourcing decisions and (ii) firms’ exports decision when facing multiple sources of uncertainty. Firms’ decisions to enter new foreign markets, exit from foreign markets that they are currently serving and whether to vertically integrate or outsource with foreign firms (i.e. their global sourcing decisions). Not only do these decisions require high sunk costs (cf. Roberts and Tybout (1997) and Antras and Helpman (2004)) but they are also subject to an additional set of uncertain conditions, e.g. exchange rates, foreign market conditions, and foreign policies. In particular, these potential multiple sources of uncertainty can work as an amplification mechanism, specially during recessions. The first chapter discusses the key insights that motivates my dissertation. The second chapter develops a dynamic model of international trade with heterogeneous firms who endogenously decide when to start exporting to foreign markets, under which sourcing scheme, and when to exit foreign markets in a framework with foreign demand uncertainty. The third chapter focuses on empirically evaluating the theoretical model of the previous chapter using U.S. firm-level data. I find that integration reduces the probability that a firm exits by as much as 8%, while uncertainty increases this probability by 23%. The fourth chapter looks into the interaction between demand and policy uncertainty during the Great Trade Collapse and is joint work with Kyle Handley and Nuno Limao. We examine if the resulting change in policy uncertainty initially deepened the collapse and then helped reverse it, when the worst fears of protection were not realized.