Essays on supply and demand determinants of international trade

Countries import products that they demand in excess of their supply and export products that they supply in excess of their demand. Understanding the international patterns of trade thus requires understanding their demand and supply determinants. The first chapter of this thesis focuses on a particular demand-side determinant of international trade: the tendency of richer countries to consume higher quality goods. I provide a framework to estimate the effect of cross-country differences in product quality on bilateral trade flows. The model allows countries to differ in the quality of the goods they produce, and allows aggregate demand for quality to depend on average income. It also embeds other determinants of international trade, such as differences in factor proportions. I estimate the model using cross-sectional data on bilateral trade flows at the sectoral level. The empirical results confirm the theoretical prediction: richer countries import relatively more from countries that produce higher quality goods.; The second chapter (co-authored with Doireann Fitzgerald) focuses on differences in relative factor endowments between countries as a supply-side determinant of specialization in manufacturing. Relative factor endowments are not randomly given, but the result of accumulation in response to economic incentives. Taking this into account allows us to reconcile contradictory predictions in the empirical literature. We estimate the effect of factor proportions on specialization in a cross-section of OECD countries. Our results are consistent with evidence on sectoral factor intensities. Since relative factor endowments are systematically related through the accumulation process, we cannot always identify with precision the separate effect of each factor. However, our model predicts well the substantial reallocation within manufacturing that takes place as countries grow.; The third chapter analyzes the differential impact of economic integration on multinationals and domestic firms. The theoretical model is based on a multiproduct firm market structure. Two opposite effects are identified. First, domestic firms have more incentives to expand because sales in the foreign country do not cannibalize previous sales in that market. Second, higher fixed costs of exporting can prevent them from entering that market, hampering their incentives to expand. Depending on the magnitude of these costs, one effect dominates the other. The model also accounts for specialization at the firm level, a phenomenon not yet formally described in the theoretical literature.