Year of Publication

2009

Degree Name

Doctor of Philosophy (PhD)

Document Type

Dissertation

College

Agriculture

Department

Agricultural Economics

First Advisor

Dr. David Freshwater

Second Advisor

Dr. Michael R. Reed

Abstract

This dissertation explores the impact of international trade on the geographic location of manufacturing activities and on regional productivity growth patterns within countries. This study develops models of trade with monopolistic competition in the context of a two-region country. It also provides empirical estimates of the e ect of tari policy on the distribution of industrial activities and on productivity growth di erentials across Colombia's regions.

The rst essay investigates the consequences of trade liberalization for the distribution of manufacturing activities between large and small cities. It presents an extension of the Melitz (2003) model of trade with monopolistic competition and heterogeneous rms where producers' location and export market participation decisions depend on their productivity. As a country's exposure to trade shifts, rms and output are reallocated between large and small urban areas. Data from Colombia's manufacturing sector lend support to theoretical predictions concerning tari reduction's impact on the repartition of industrial activities between metro- and nonmetropolitan areas in this country.

The second essay extends the New Economic Geography, Footloose-Capital model to examine the e ect of commercial policy on the distribution of industrial activities between regions within a country. This study aims at distinguishing theoretical cases with regard to the nature of the trade policy change or to the source of asymmetry between regions. It shows that trade liberalization can have adverse consequences for the manufacturing sector of a small or isolated region under bilateral liberalization, but a positive impact under unilateral trade liberalization.

The third essay adapts the Melitz and Ottaviano (2008) model of trade with monopolistic competition, heterogeneous rms, and variable mark-ups to analyze the relationship between trade openness, regional market size, and regional aggregate industry performance. It demonstrates that the impact of trade liberalization on aggregate industry productivity growth varies across regions as a function of regional market size and proximity to foreign markets. A larger region experiences a greater increase in aggregate productivity through intra-industry reallocation of market shares. Similarly, a region with better access to international markets enjoys a higher productivity growth from tari reduction. Empirical evidence is obtained from the Colombian manufacturing sector.

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