Three Essays on International Trade and Environmental Economics

Park, Doyoung

Graduate Thesis Or Dissertation

Three Essays on International Trade and Environmental Economics Öffentlichkeit Deposited

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Citeable URL: https://scholar.colorado.edu/concern/graduate_thesis_or_dissertations/tq57nr07h

Abstract

The first chapter studies firm production networks as one of the channels through which globalization leads to spatial heterogeneity in the volume and intensity of emissions. I observe that coastal areas where firms are able to minimize shipping costs to foreign markets are characterized by greater total emissions but lower emission intensities relatively to interior regions when firms are linked via networks. To reach this conclusion, I first analyze the role of production networks in determining total emissions and emission intensities of firms. Second, I explore how the interconnected firms optimally choose their locations between the coast and inland regions following globalization. I find that production networks encourage firms to outsource intermediates to other firms, which in turn reduces their own emission intensities, but increases total emissions because of higher levels of production. I additionally discover that globalization incentivizes large and efficient firms to relocate near the coast. Firm linkages encourage smaller firms to collocate with the large firms in order to maximize their profits from domestic inter-firm trade. The coastal concentration of firms thus becomes a detriment of coastal environmental amenities owing to higher emission levels. However, the intensifying outsourcing activities of coastal firms has the effect of lowering firm-level and regional emission intensity which offsets the degradation of the environmental quality in the coastal areas.The second chapter investigates how an imbalanced allocation of property rights induces technology adoption in exporting versus importing sectors. I find that exporting entities are likely to experience productivity gains as a result of an imbalanced allocation of property rights in a small open economy because international trade leads to expanded production in export sectors. Furthermore, a small country faces a higher relative world price of exports in the world market which improves the marginal returns of directing technology towards the export-oriented sectors. In a large economy, on the other hand, where the world price can be affected by the amount of exports, the direction of technical changes is affected by the relative price of the export goods (i.e., the terms of trade) and the elasticity of substitution between intermediates (i.e., imports and exports) utilized for the production of final goods. The direction of technology adoption activities is clearly geared towards the exporting sectors (which by assumption possesses a larger allocation of property rights) when intermediates are gross substitutes and the terms of trade are reduced only marginally by trade liberalization. However, the gross complementarity between intermediates and the significant drop in the terms of trade lead technical change in sectors that is handicapped by a lower initial allocation of property rights.The last chapter explores the optimal property right allocation regime in a large open economy, motivated by the real-world imbalanced allocation of water rights in California towards the export-oriented agricultural sector. Using a computable general equilibrium framework, I find that the volume of international trade is bolstered by the concentration of property rights in the exporting sector, but social welfare diminishes due to the drop in the values of exported commodities. I suggest a second-best policy such as an import tariff or export tax to offset the existing market distortions arising from an imbalanced allocation of property rights and to promote a more socially efficient outcome. The contribution of this paper is in exploring the insufficiency of free property right markets in addressing market distortions, and emphasizing the adoption of second-best international trade policies to encourage property right holders in the exporting sector to divert their rights and natural resources to the other sectors.

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