Essays in international economics

My dissertation consists of three self-contained essays in international economics. The first and third chapters are solely authored. The second chapter is co-authored with Arpita Chatterjee and Rafael Dix Carneiro.;The first chapter provides a simple theoretical model for understanding how the difference in the level of intellectual property rights protection determines trade patterns. In particular, I examine how countries' levels of patent protection affect exports in industries with different degrees of reliance on innovation. In contrast to most models of institutional comparative advantage, which predict that countries with superior institutions specialize in industries that are very dependent on institutions, I show that higher patent protection does not necessarily lead to specialization in industries that rely heavily on innovation. There may exist a threshold beyond which occurs a reversal of specialization patterns, a consequence of monopoly power inherent in intellectual property rights protection. I then use the model's implications to assess empirically whether such predicted patterns hold in cross-country trade data and find evidence for general patterns of specialization as well as a reversal of such patterns among countries with high levels of patent protection.;The second chapter studies the effect of exchange rate shocks on the export behavior of multi-product firms. We construct a model to illustrate how firms adjust their prices, quantities, and product scope in the event of an exchange rate depreciation. Firms' markups depend on their productivity levels and local distribution costs. Each firm faces a product ladder, according to which marginal costs of production are higher for products further away from the firm's core competency. In response to a real exchange rate depreciation, firms increase producer prices more for products closer to their core competency. We also show how the adjustments that firms undertake lead to a change in the distribution of sales across products. We then assess the predictions of the model on a rich Brazilian firm-level dataset that contains destination-specific and product-specific export values and quantities spanning the period of 1997--2006, during which Brazil experienced a series of drastic currency fluctuations. After controlling for industry and destination characteristics, we find that within-firm heterogeneity across products is an important determinant of exchange rate pass-through.;In the third chapter, I study what the observed prices charged by exporters imply about different theories of international trade. Using the same Brazilian dataset, I am able to identify technological factors and demand factors that determine the pricing behavior of firms when they enter new markets and when they start exporting new products. I also explore how prices evolve as firms gain more experience in exporting certain products and in exporting to certain destinations. I find that firms that export to new destinations tend to charge prices that are lower than average prices, an evidence of a demand-side mechanism in which firms face high demand elasticity upon entry into a new destination. In contrast, firms that export new products usually charge prices that are higher than average prices, providing support for the Melitz (2003) model, in which new firms are those with lower productivity levels than incumbents. As firms spend more time in a given destination, I find that their product prices tend to increase, consistent with the fact that demand elasticity for a firm's products decreases as buyers develop relationships with the firm. Lastly, product prices are lower the longer the firm has been exporting those products, lending empirical support to the learning-by-exporting literature.