Essays in applied economics

The first chapter extends the structural approach to the gravity equation to incorporate an element of economic development. I show that ignoring the fact that countries begin importing only when their income exceeds a certain level biases the estimated effect of trade barriers upward. The chapter provides evidence that ignoring non-homothetic factors overstates the distance elasticity of imports by about 35%. Furthermore, since distance does not impede trade by as much as in the homothetic model, proportionate increases in income result in more than proportionate increases in trade shares in the non-homothetic model.; The second chapter develops a model in which a lobby is faced with the option of allocating a scarce resource among two alternative uses. In equilibrium its optimal response depends on the business cycle, which is driven by changes of a productivity parameter and the fixed cost of lobbying. The lobby is more likely to bid for higher tariffs when either productivity or the fixed lobbying costs are low. Exploring the role of lobbies in buying protection, the chapter offers a new theory explaining the commonly observed tariff cycle.; The third chapter offers new evidence on the returns to seniority and returns to experience, using an extension of a semiparametric estimator. The extension is motivated by the idea that with costly search, persons with more resources would be able to improve their chances of finding a better paying job. I explicitly model both the wage and the participation equation, allowing for individual heterogeneity and the endogeneity of the unobservable job match component. I find that returns to experience are the major determinant of wage growth for people without college degree. For college graduates, wage growth is determined mainly by seniority.