Three essays on the geography of international trade

Nelson B Villoria, Purdue University

Abstract

Geography matters. This is the fundamental premise of this thesis. All three essays utilize time series/cross section data on bilateral trade flows amongst the nations of the world to provide insights about how important developments in one part of the global economy affect other countries. Two issues of contemporary interest are examined. The first essay examines the geographic impact of a biofuel-triggered expansion of crop production in the United States on land use and global greenhouse gas (GHG) emissions. This issue has been prominent in the public debate over renewable fuel standards in California, Washington, DC and Brussels. The two most widely used trade models in this debate embody fundamentally different views of how such international land use change occurs. Therefore, this essay develops a model of land use which nests the two competing theories of price transmission in the international coarse grains sector. Statistical tests reject the integrated world market model in favor of the differentiated goods, geography-based model. Allowing competition in third markets to modulate the supply responses of individual countries leads to the prediction that most land use changes occur in the world's relatively more productive regions. This results in less global area expansion and, by extension, less GHG emissions. The second and third essays in this thesis examine different channels by which China's growth over the past two decades has altered the global economic landscape. Essay two examines how China's demand-side growth for has affected food prices in general, and export and import prices more specifically. Empirical findings suggest that China has been a source of mild global price inflation. However, this effect tends to be stronger in countries geographically closer to China. Food exporters in Asia, Latin America, and Southern Africa have all benefited from this upward pressure on global food prices. The third essay focuses on the enormous growth in China's manufacturing supply capacity over the past two decades. Particular emphasis is placed on the impact of this growth on manufactures production in Sub-Saharan Africa. Analysis using an econometric model of bilateral international trade identifies two competing effects: the beneficial impact on African importers of manufactures, due to access to lower-priced Chinese goods, and the adverse impact on African manufacturing exporters due to more intense competition in third markets. In the three economies this study focuses on: Kenya, Mauritius, and the South African Customs Union, the findings suggest that the depression of Africa's manufacturing export prices attributable to China outweighs the reduction in manufacturing import prices, leading to a significant reduction in these African economies' terms of trade.

Degree

Ph.D.

Advisors

Hertel, Purdue University.

Subject Area

Economics|Agricultural economics|International law

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