Microeconomic implications of trade shocks in developing countries

Fernandez Guerrico, Sofia

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Description

Title

Microeconomic implications of trade shocks in developing countries

Author(s)

Fernandez Guerrico, Sofia

Issue Date

2020-07-10

Director of Research (if dissertation) or Advisor (if thesis)

Akresh, Richard

Doctoral Committee Chair(s)

Akresh, Richard

Committee Member(s)

• Thornton, Rebecca
• Borgschulte, Mark
• Bartik, Alexander

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Trade shocks
• local labor markets
• mortality
• population growth
• migration
• firm heterogeneity
• economic development

Abstract

This dissertation investigates individual- and firm-level responses to trade and local labor market shocks in developing countries. The first chapter studies the effect of a trade-induced negative shock to manufacturing employment on leading causes of mortality in Mexico between 1998 and 2013. I exploit cross-municipality variation in trade exposure based on differences in industry specialization before China's accession to the WTO in 2001 to instrument for changes in local manufacturing employment. I find trade-induced job loss increased mortality from diabetes, raised obesity rates, reduced physical activity, and lowered access to health insurance. These deaths were offset by declines in mortality from alcohol-related liver disease and ischemic heart disease. These findings highlight that negative employment shocks have heterogeneous impacts on mortality in developing countries, where falling incomes lead to less access to health care and nutritious food, but also reduce alcohol and tobacco use. The second chapter examines the effect of trade-induced changes in Mexican labor demand on population growth and migration responses at the local level. I exploit cross-municipality variation in exposure to a change in trade policy between the U.S. and China that differentially exposed Mexican municipalities based on their industry structure. In the five years following the change in trade policy, most exposed municipalities exhibit increased population growth, driven by declines in out-migration. Conversely, six to ten years after the plausibly exogenous change in trade policy, exposure to increased trade competition is associated with decreased population growth, driven by declines in in-migration and returned migration rates, and increased out-migration. I show that accounting for changes in population growth and migration response is relevant to analyze the effect of employment shocks on outcomes that are calculated using population estimates, such as mortality rates. The third chapter explores the relationship between quality adoption, product differentiation, and export performance. Through tax identification numbers, I match firm-level survey data to administrative customs records containing information about each firm's total value of exports by product type and country of destination. I classify products into differentiated and non-differentiated, and I use ISO 9001 certification as a proxy for firms' ability to produce high-quality products. First, I show that firm-product-destination-year unit values are higher for high-quality firms, on average. Second, using the 2002 Argentine exchange rate devaluation as a source of variation in export demand, I find that initially high-quality firms increased total export value, export value of differentiated goods to high-income destinations, and investments in R&D more than low-quality firms after the devaluation. These results imply that policies promoting quality adoption may increase firms’ exports to high-income markets and help develop a comparative advantage in differentiated products.

Graduation Semester

2020-08

Type of Resource

Thesis

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Copyright 2020 Sofia Fernandez Guerrico

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