Essays in international trade

This dissertation addresses two topics on how international trade would impact innovative activities. The first chapter examines a product cycle driven by Northern firms and attempts to supplement preceding studies on product cycles by Southern firms' imitation. For this purpose, I develop a general equilibrium model in which both product innovation and product standardization are endogenously determined by Northern firms. The model exhibits an endogenous product, cycle in North-South trade, which is more akin to Vernon's celebrated product cycle hypothesis than the Southern imitation type product cycles. An increase in the relative size of the South brings about accelerated production shifts to the South, a lower product innovation rate in the North, and a higher Northern relative wage. A tightening of intellectual property rights in the South encourages product standardization and accelerates the production transfer to the South. However, this favorable effect for the South is offset by the associated increase in Northern monopolists in the South. Thus, it is not clear whether the Southern relative wage increases. If we assume that the technology for product standardization is constant returns to scale, the Southern relative wage unambiguously rises.;The second chapter studies the formation of the entrepreneurial class in a simple trade model in which asymmetric information between entrepreneurs and financial intermediaries limits the extent to which the entrepreneurial class prospers. In a world economy with two countries identical except for the efficiency of financial intermediaries, the country with more efficient financial intermediaries exports the entrepreneur intensive good. Such a country not only expands the entrepreneurial class but also enjoys reduced agency problems resulting from improved terms of trade. However, if free trade in financial intermediary services is also permitted, the country with more efficient financial intermediaries loses comparative advantage in the entrepreneur intensive good and does not enlarge the entrepreneurial class relative to autarky. In particular, without international capital mobility, this country's entrepreneurial class would be smaller than the other country's. Also, the agency problem in the entrepreneur intensive good would be worse than the other country.