Essays in applied international trade

This collection of essays focuses on the utilization of econometric and quantitative methods, together with rich data sets, to study issues in applied international trade. In chapter two I use firm-level data for Mexican exporters to show that theories that emphasize the role of firm heterogeneity can account for cross-sectional facts regarding the distribution of exports across firms and destinations, but that their extension to a dynamic stochastic setting fare less well when contrasted against the data. In addition, I document the internationalization process of new export entrants along both the extensive and intensive margins of trade, which provides a more detailed account of the dynamics of new export entrants than what is currently available in the literature. In chapter three I use transaction data from Mexican exporters to build and estimate a micro founded model of export supply featuring self-discovery. The estimated model accounts well for key features of the observed dynamics of new export entrants, which were documented in chapter two. The model and my estimates imply that the discovery stage in the export market lasts for approximately four years, that the rewards of self-discovery take the form of higher ex-ante probabilities of serving the foreign market and higher export premia, and that temporary shocks to the profitability of serving the foreign market can have long-lived effects on total exports. In chapter four I use data on trade flows together with test scores from the International Adult Literacy Survey, which allows me to construct a novel measure of the distribution of talent in the population, to assess the role that worker heterogeneity has in shaping the pattern of trade. My estimates show that the distribution of skills explains more of the pattern of trade than countries' endowment of capital and institutional features combined.