Essays on International Trade and Development

This thesis contains three papers examining topics related to international trade, growth, and development. In chapter 1, I examine the role of buyer-seller relationships on the global platform for the transfer of knowledge across borders, wherein firms can learn about products produced by each other in a transaction. I find that an exogeneous increase in plants’ access to foreign downstream knowledge through exports increases the likelihood that they produce new downstream products. I then build a model of international trade, knowledge spillovers, and growth to analyze the general equilibrium effects of such firm-level innovation on aggregate economic outcomes and find that trade induces growth and a convergence of the technology gaps between countries. Further, firm level innovation activity reduces in response to this convergence reflecting the lower opportunities to learn from foreign firms.In chapter 2, which is based on joint work with Stephen Ayerst, Faisal Ibrahim, and Gaelan MacKenzie, we study the role of knowledge embodied in traded goods for knowledge diffusion. We use US patent citation data to first, construct a knowledge input-output structure, and second, to measure embodied knowledge in products that is useful for the production of innovative ideas in a sector. We find that countries that import more knowledge from the United States that is useful for knowledge production in a specific sector also have increased innovation activity (R, researchers), innovation outputs (patents, citations), and finally employment and output production in that sector. Further, these results are stronger in richer economies, suggesting that they are better able to utilize frontier knowledge to generate new innovations. In chapter 3, which is based on joint work with Marijn Bolhuis and Diego Restuccia, we study how distorted rental markets for agricultural land lead to low agricultural productivity in India. We first recognize that there is large variation in land market institutions across different states in India due to colonial institutional precedence and differences in state-level land reforms implemented post-independence. We find that states with more rental market activity feature less misallocation, and also reallocate land more efficiently over time. Based on this observation, we build a model of land rental markets and heterogeneous farms and estimate land market frictions by state. Land market distortions contribute to about one quarter of the differences in agricultural productivity across states. Without rental activity agricultural productivity falls by 22%, and reallocating land more efficiently can increase agricultural productivity by 29% on average.Ph.D