Essays on Firm Behavior in International Trade

Abstract

[eng] International trade experienced an unprecedented growth and the world economy has been more integrated than ever before in the last decades. During this period, access to international trade helped firms to produce their products more efficiently, conduct innovative activities, create more jobs, invest and increase human capital, become more environmentally friendly and increase the quality of their products. As the actual actors of cross-border transactions, firms determined trade flows and shaped the international trade architecture. They formed trade networks and Global Value Chains (GVCs) by organizing their production across distinct locations with the support of technological improvements. Therefore, examining the firm behavior is vital for trade studies to understand the dynamics in product and labor markets as well as consumer behavior more easily. This thesis aims to provide evidences on the implications of firm behavior in international trade and the effects of firms’ trade activities on their performance and labor market outcomes. In this regard, I examine the causes and consequences of firm behavior in trade activities and how firms’ decisions shape international trade flows. Chapter 2 examines the impact of robot adoption on global sourcing strategies of firms. With my thesis advisors as co-authors, we develop a theoretical model and empirically show that foreign sourcing activities of robot adopters increased between 2006 and 2016 but robot adoption did not affect firms’ domestic sourcing activities. The findings in this analysis indicate that robots promote trade in intermediate inputs. Chapter 3 highlights the importance of export market destination in explaining productivity gains from exporting. I discover that rising share of exports to low-income destinations in sales driven by real effective exchange rate devaluation reduced productivity and upgrading efforts of firms. In contrast, the share of exports to high-income destinations in sales did not change during the Great Recession and therefore had no impact on productivity and upgrading efforts. In Chapter 4, I develop a method that allows to estimate the effect of firm behavior on labor market monopsony power. Using this framework, I show that larger exports of Spanish manufacturing firms raised their labor market monopsony power from 1996 to 2007. This evidence shows that more intensely exporting can increase firms’ monopsony power in labor markets.