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Abstract

This thesis has three chapters on international trade. The first chapter develops a sequential model to study the impact of trade costs on developing countries’ industrialization. The model predicts that a decrease in trade costs is associated with South joining and moving up the value chain and both North and South experience welfare improvement. The North-South wage gap first increases and decreases. The second chapter examines how trade policy can be contagious along a country’s supply chain. The chapter builds a theoretical model with vertical linkages to guide the empirical and quantitative analyses. Using trade protection and input-output tables from the US, the chapter finds that protection of inputs increases the demand for protection of their output industries, and the associated welfare losses are substantial. The third chapter studies the interaction between trade and domestic migration frictions in the context of China. The chapter finds that input trade liberalization has induced significant spatial labor reallocation in China, with a stronger effect in regions with less hukou frictions. Evaluated under a quantitative spatial mode, abolishing the hukou system improves the gains from trade and alleviates its negative distributional consequences. The chapter also develops a novel measure of migration frictions associated with the hukou system.

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