UC Berkeley

This dissertation explores modern international economics, whereby the accessibility of micro-level data has propelled the boundaries of the discipline, both in terms of theoretical modeling as well as empirical substantiation.

In Chapter 1, we propose a model that features firm heterogeneity in both exposure and responses to input tariff shocks. We show that this setting gives rise to a new anti-competitive effect that extends the benchmark welfare gains from trade liberalization. We derive a sufficient statistic for the anti-competitive effect in a general environment — the correlation between firm market shares and their cost shares of imported inputs. The interplay between import-intensiveness and market power implies that larger firms both benefit more from input tariff cuts and pass through less of the cost reductions, leading to an increased dispersion of markups in the aggregate.

In Chapter 2, we provide empirical evidence using a unique collection of firm-level microdata from Colombia around its 2010 trade reform to empirically test this framework. The dataset records the entirety of firm-level inputs, both imported and domestically sourced, which enables us to disentangle and identify firm-specific exposure and responses to input tariff shocks. Our quantitative analysis demonstrates that input tariff liberalization brings about a substantial anti-competitive effect, whose magnitude can be on par with the pro-competitive effects in the episode we study.

In Chapter 3, we switch gears from firm heterogeneity to household heterogeneity to investigate the main factors driving household saving rates using cross-country household survey data collected by the Household Finance and Consumption Survey. This allows us to observe household-specific characteristics and examine the ambiguity in the existing literature on the signs of the main determinants of household saving rates. We find that households at lower saving quantiles are more vulnerable to macroeconomic shocks. The evidence from household microdata suggests the need for targeted rather than universal policy intervention.