Three Essays on International Trade

The thesis singles out the complex interactions between trade and migration, highlighting the individual channels of interaction. The dissertation is mainly applied but with an emphasis on underlying theoretical models as well. The focus is on the model proposed by Eaton and Kortum (2002), and - in particular - on the trade share equation, which is an alternative (and still unexplored) way to identify trade cost elasticity. The first chapter assesses whether there was any link between the quality of goods exported (imported) and the skill level of migrants. Using information on HS-6 digit category traded goods between 177 countries of origin and 19 receiving countries for the years 1995 and 2000, rather than on their degree of heterogeneity as it has been common in this literature, it tests whether the pro-trade effects of high-skill immigrants differ from the effects of low skilled. The findings, as expected, show that the high skill migrants have larger pro-trade elasticities. The second chapter investigates the trade share equation within the Eaton and Kortum (2002) model, which provides an alternative source of identification for the elasticity of trade. The results show that this specification provides convincing results and a much tighter link between the estimates of country's competitiveness and their theoretical counterparts. The third chapter builds on the trade share equation from the Eaton and Kortum (2002) model and it investigates the trade migration link at sector level. The chapter develops a theoretical model (in the line of Fieler, 2011) and it quantifies the pro-trade effects of immigrants for 18 manufacturing sectors in a sample of 19 OECD countries. The analysis shows that accounting for ethnic networks in trade equations has important implications for the estimation across all manufacturing sectors. More precisely, when ethnic networks are included among the determinants of trade, the elasticity decreases. This drop corresponds - on average - to a welfare gain of 4.16% of national income.