Essays on Trade, Technology and the Organization of Firms

Abstract: "Endogenous Sunk Costs, Exporting and Heterogeneous Firms"Empirical evidence shows that R&D spending is highly correlated with firm productivity and highly concentrated among large firms. This paper develops a model of quality competition with heterogeneous firms that can explain these patterns. The model makes two new predictions. The first prediction is that exporters upgrade while domestic firms downgrade when trade liberalizes. The second prediction is that quality competition reduces the effect of trade liberalization along the extensive margin."Endogenous Product Differentiation, Market Size and Trade"Recent empirical evidence suggests that average export prices are higher when firms sell in large markets. This paper offers a theoretical explanation for why we do not always see pro-competitive market size effects in the trade data for differentiated goods. The model here proposes that export prices can in fact be higher in larger countries because firms have greater incentive to differentiate their products, which increases price-cost markups. In the two-country case the model predicts that larger countries sell manufacturing goods at higher price-cost markups than smaller countries."Institution-Driven Comparative Advantage, Complex Goods and Organizational Choice"The theory of the firm suggests that firms can respond to poor contract enforcement by vertically integrating their production process. The purpose of this paper is to examine whether firms' integration opportunities affect the way institutions determine international trade patterns. We find that vertical integration lessens the impact of a country's ability to enforce contracts on the comparative advantage of complex goods. We also find that countries with good financial institutions export disproportionately more in sectors that produce complex goods and that have a high propensity for vertical integration.