Essays on trade patterns and policy reform in models with differentiated products.

摘要

The first two essays examine the significance of product differentiation in the determination of bilateral trade flows. The simple theoretical model considered suggests that the export flow from country i to country j is simply equal to country i's production multiplied by country j's share of world income. Using disaggregated trade and production data I demonstrate that it is necessary to consider the output and income share effects separately. I also show that due to the lack of time series variation in the data the estimates of the income share coefficients are not reliable when country-pair fixed are also estimated. I consider two methods for reestimating the model that enable me to measure the income share effect. I also show that there is a great deal of missing trade, particularly for the poorer countries. Contrary to previous results in the literature, these result indicate that product differentiation is probably significant for the determination of bilateral trade flows for the developed nations but not for the poorer nations.;Essays three and four examine the issue of inefficient entry of firms in imperfectly competitive industries. When goods are homogeneous, I show that the optimal number of firms depends on the extent to which foreign firms are present. I show that the optimal number of firms exceeds the free entry level if there is enough of a foreign presence as measured by the fraction of foreign firms present in the domestic market. I also show how factors such as the source of entry, home or foreign, and the extent of product differentiation within and between home and foreign firms affect the desirability of free entry.;Finally I calibrate a model to the Indian automobile industry and consider the affect that free entry has on prices, production levels, and welfare. I have two main findings. First, that despite the experiences of other countries, free entry is a desirable policy in this market. Second that the excise tax of 40% levied on automobiles does not seem to have a major adverse impact on welfare.