| This thesis consists of two chapters. Chapter 1, which is a joint work with Lorenzo Caliendo, builds into a Ricardian model the role of trade in intermediate inputs, sectoral linkages and differing productivity levels across sectors. We also propose a method to estimate sectoral trade elasticities. In our model, the trade effects due to overall tariff reductions account for most of the observed changes in trade flows for NAFTA members. We decompose the effects of NAFTA and find that 93% of Mexico's, 58% of Canada's and 55% of the United States' trade effects can be attributed to NAFTA's tariff reductions. Trade in intermediate inputs and input-output linkages can amplify the welfare effects of tariff reductions.;Chapter 2 studies the effect of changing worldwide trade costs and technologies on the skill premium in the presence of capital-skill complementarity. The skill premium has risen in many countries over the last 20 years. This increase could be a result of skill-biased technological change. It might also be the result of reductions in trade costs that have made it easier for low wage workers in poor countries to produce goods for export to wealthier countries (the Stolper-Samuelson effect). This effect would raise the skill premium in some countries and reduce it in others. Still a third possibility is that a decline in trade costs fosters increasing trade in capital goods, raising the productivity of skilled relative to unskilled workers. I call this mechanism skill-biased trade. I construct a multi-country model of international trade with capital-skill complementarity that admits all these possibilities and estimate it over the period 1990--2007. I find that the impact of skill-biased trade is much larger than that of Stolper-Samuelson effects. Trade led to an increase in the skill premium in all countries, most notably in developing countries. The impact of skill-biased technical change on the skill premium is of a similar magnitude as skill-biased trade. Regarding welfare gains from trade, I find that both skilled and unskilled labor gained from trade. Finally, I provide empirical evidence of a positive association between gains from trade and income inequality. |
