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Essays on International Trade and Economic Growth

In this dissertation I study the relationship between trade and economic growth, with a focus on developing economies. I specifically provide a critical review of the consensus view in trade and growth, according to which a liberal trade regime is generally the best policy stance to promote growth. In the first essay of this dissertation, I provide evidence that the relationship between trade policy and growth may depend on economic structure: tariff reductions are followed by higher levels of GDP per capita for manufacturer countries, but lower levels for nonmanufacturers. Testing for mechanisms, I find the heterogeneity seems to be linked to changes in productivity, capital accumulation, and the manufacturing share of GDP. In the second essay, I present a model of North-South, innovation and diffusion, which provides a theoretical rationale of the evidence found in the first essay, especially regarding nonmanufacturers (the South). The model also challenges a recent consensus of the trade and innovation literature. This consensus establish that specialization according to comparative advantage is detrimental to the development of the South only if there is no international technology diffusion. Technology diffusion does exist from the North to the South in my model, but it occurs only through the modern sector. The model confirms that technology diffusion is a force of convergence but shows that trade leads to both a lower technological proximity to the frontier and a lower relative income, what I call uneven development. In the third essay, co-authored with Emiliano Libman and Arslan Razmi (published in Structural Change and Economic Dynamics), we study the extent to which countries undergo structural change during and after episodes of sustained investment surges. In particular, we explore the evolution of trade flows, considering (i) exports sophistication or complexity, (ii) exports diversification, and (iii) capital goods imports. Using the episodes identified by Libman et al. (2019) we find that, while imports of capital goods increase, they are not systematically related to changes in sophistication, complexity and diversification of exports. Thus, high investment may often be a necessary but not sufficient condition for structural change.
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