Firm behaviour in international markets

This thesis consists of three essays on firm behaviour in international markets. Abstracts can be found at the beginning of their respective chapters. The first chapter, titled "Trading Tasks and Quality", presents a tractable trade model that combines vertical product differentiation at the firm-level with international fragmentation of production to explain some recently unearthed stylised facts about exporters in developing countries. In line with the recent empirical evidence, it suggests that there is a close link between exports and imports at the firm-level, and it is quality that establishes the link between the two. The second and third chapters revisit the debate on globalisation and wage inequality. The second chapter, titled "The Trade and Wages Debate Revisited: A new explanation for an old mystery", develops a general equilibrium model where trade liberalisation between two identical countries increases wage inequality in favour of white-collar workers. It shows that country characteristics, such as the relative endowment of white-collar workers and the degree of competition, matter for the equilibrium level of wage inequality after trade liberalisation. The endowment of white-collar labour also affects the level of openness; an increase in the worldwide supply of white-collar labour expands the range of traded goods and increases the volume of trade in already-traded goods. Furthermore, it improves global welfare. The third chapter, titled "Cross-border Mergers and Wage Inequality", focuses on another aspect of globalisation and its effect on wage inequality. It suggests a two-way relationship between cross-border mergers and wage inequality: on the one hand, wage inequality in favour of white-collar workers increases the protability of cross-border mergers; on the other hand, at any level of openness, wage inequality is lower in the presence of cross-border mergers than in their absence. Therefore, participation of a country in global business raises wage inequality, but its level is lower under trade and investment integration compared to trade integration only.This thesis is not currently available via ORA