Essays on international trade and political economy: The importance of incentives, information and globalization

Chapter 1. This paper examines host governments' motivations for restricting ownership shares of multinational firms (MNFs) in foreign direct investment (FDI) projects. A host country has a profitable investment opportunity. The host government wants to capture the project's rent yet cannot observe the surplus created by the MNF. In contrast, a joint venture (JV) partner can observe the surplus. The host government can alleviate its informational constraints by using ownership restrictions to force a JV. This calls into question the wisdom of calls for 'liberalizing' FDI flows by the elimination of domestic JV requirements.; Chapter 2. We study the effect of globalization on the wage volatility and worker welfare in a model in which risk is allocated through long-run employment relationships. Globalization can take two forms: international integration of commodity markets and international integration of factor markets. We show that free trade and outsourcing have opposite effects on rich-country workers. Free trade hurts rich-country workers, while reducing the volatility of their wages; by contrast, outsourcing benefits them, while raising the volatility of their wages. We thus formalize, but also sharply circumscribe, a common critique of globalization.; Chapter 3. This paper analyzes an informational theory of lobbying in the context of strategic trade policy. A home firm competes with a foreign firm to export to a third country. The home policymaker aims to improve the home firm's profit by using an export subsidy. The optimal subsidy depends on the strength of the demand which is unknown to the policymaker. The home firm is given a chance to lobby the policymaker. Surprisingly, the presence of lobbying costs can be advantageous for both: It makes the home firm's lobby effort a costly signal that can reveal its private information and eases the policymaker's information problem.; Chapter 4. Economists' models of trade-policy determination generally assume unitary government. We offer a congressional model. Under assumptions guaranteeing a median-voter outcome under a unitary model, we find a wide range of possible outcomes: Any policy from the 25th to the 75th percentile voter's optimum can emerge in equilibrium. We discuss implications for empirical work.