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" Essays on Economic Integration and Resource Allocation "
Fei, Xuan
Feenstra, Robert C.
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Latin Dissertation
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English
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| Record Number
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1052040
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| Doc. No
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TL51157
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| Main Entry
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Fei, Xuan
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| Title & Author
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Essays on Economic Integration and Resource Allocation\ Fei, XuanFeenstra, Robert C.
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| College
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University of California, Davis
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| Date
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2019
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| Degree
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Ph.D.
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2019
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| Note
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166 p.
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| Abstract
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One of the most significant developments affecting the world's economies in the past half-century has been economic integration, particularly in international and intra-national trade. The economic integration is often viewed to be a crucial driver of economic development, as it raises income through facilitating specialization in comparative-advantage sectors via an efficient reallocation of resources and shape the pattern of structural transformation while the challenge for policymakers is to ensure that resources are optimally allocated and benefits are sufficiently widely shared. It highlights the importance of understanding the relationship between economic integration and resource allocation. This dissertation focuses on how integration shapes the resources allocation and the effects on the welfare of well-being. The first chapter focuses on the impacts of frictions in the land market allocation in China on the diffusion of economic activities as well as its welfare and inequality consequences. The paper quantifies the welfare losses of land market frictions in China by proposing a spatial equilibrium model where heterogeneous firms in a variety of sectors choose their locations across regions with costly trade, labor migration frictions, and land distortions. I match land transaction and firm-level survey data to estimate land distortions for firms. Misallocation arises because similar firms are faced with various land prices, which effectively preventing more productive firms from choosing bigger cities where they could benefit from agglomeration forces and access to higher productivity. The framework incorporating land market frictions could explain the undersized cities in China, which is pointed out by \cite{au2006chinese} and \cite{chauvin2017different}. The estimates suggest significant adverse effects of land policies on the economic welfare in China. Further counterfactual exercise indicates that land reforms conducted together with labor migration reforms in China could generate more substantial welfare gains and smaller regional inequality at the same time. Chapter 2 studies the role of international trade for structural changes, particularly the manufacture shares in the economy. Since notable heterogeneity regarding international trade freeness and level of development across different regions with significant cross-provincial migration has been a prominent feature in contemporary China, this paper examines the particular role of international trade in the structural transformation of each region in China. Combining several databases, I find that there exhibits a non-monotone, hump-shaped relationship between international trade freeness and prefecture-level manufacture labor share in China. I rationalize this stylized fact in a spatial equilibrium model with multi-region, multi-sector, costly trade and endogenous allocation of labor, capital, and land. The analysis highlights the role of internal geography in the international trade's impact of shaping the structural changes. While the first two research focuses on the welfare changes within-country in case of the largest developing country in the world, China, the third part of dissertation studies the role of exchange rate on trade imbalances in another developing country, Turkey. Chapter 3, joint work with Plamen Iossifov, studies whether currency depreciation improves the trade deficits in Turkey. There is an ongoing debate in the literature on whether global trade flows have become disconnected from the substantial real effective exchange rate movements in the wake of the global financial crisis. The question has important policy implications for the role of exchange rates in supporting growth and restoring external balance. In this paper, we use Turkey---a large and open emerging market economy that has experienced sizable swings of the real effective exchange rate---as a case study to test competing hypotheses. Our results lend support to the finding in existing cross-country studies that the real effective exchange rate remains an important determinant of trade flows. However, its effect is not symmetric in secular periods of appreciation and depreciation and is, often, dwarfed by the impact on trade flows of the income growth differential between trade partners.
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Economics
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International relations
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Feenstra, Robert C.
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University of California, Davis
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