Three papers in international economics and macroeconomics
Smith, Arthur V.
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This dissertation consists of three chapters in international economics and macroeconomics. The first chapter examines the impact of agents' educational and occupational choices on the relationship between trade and inequality. The second chapter studies the consequences of multinational banks' organizational choices for the international transmission of shocks. The third chapter considers the importance of geography for the structural estimation of real consumption growth. The first chapter revisits a classic question in international economics: what is the impact of trade on inequality? Empirically, I document that trade is positively associated with the share of high-skilled hours worked but not with the skill premium. This is true in both the short and long run. To explain this puzzle, I develop a tractable general equilibrium model featuring skill bias in productivity and endogenous educational and occupational choices. Quantitatively, I show the relevance of this model for the case of China's entry into the WTO and use the model to examine the impact of counterfactual trade policies. The second chapter (with Stefania Garetto and Jos\'e L. Fillat) examines how multinational banks' regulatory structures affect the transmission of financial shocks across countries. In the case of the European sovereign debt crisis, we demonstrate that the U.S. branches of foreign parent banks were more likely to contract their lending and lose deposits in response to stress in the parent country than were the subsidiaries of foreign parents. We develop a structural model of global banking, consistent with stylized facts about the banking industry. We quantify this model and use it as a laboratory to examine the impact of counterfactual regulatory regimes. The third chapter (with Jonathon P. Lecznar) studies the role of geography when incorporating product entry and exit into structural methods for estimating real consumption growth. We document three new facts related to geographic differences in consumption: (1) consumers in separate markets buy different products, (2) a product's market share varies geographically conditional on relative price, and (3) product variety growth and its cyclicality vary geographically. Quantitatively, we find that focusing on changes in aggregate product variety overstates real consumption growth by 2.75 percentage points.