Electronic Thesis and Dissertation Repository

Degree

Doctor of Philosophy

Program

Economics

Supervisor

James C. MacGee

Abstract

This thesis consists of three essays on the economic effects of agricultural and non-agricultural trade. The first essay asks whether the observed low trade intensity of agricultural goods is caused by high trade costs or small gains from agricultural trade. By empirically estimating structural equations from a trade model, I find that it is largely due to high trade costs. I also find large variation in relative efficiency of producing agricultural goods, which suggests that lower agricultural trade costs could lead to large gains from trade. The second essay asks how large are the gains from lower trade costs in the presence of the "Food Problem". I extend the Eaton-Kortum trade model to include a tradeable agriculture sector, minimum consumption and home production of agricultural goods. The calibrated model implies much larger gains from trade for poor countries than prior studies. The main reason for these gains is that intra-sectoral trade leads poor countries to specialize in a set of agricultural goods with high efficiency and inter-sectoral trade enables them to reallocate labor to manufacturing, which often is their comparative advantage sector. The third essay quantitatively evaluates the potential impact of removing China's Hukou system, which restricts rural-urban migration in China, on the world economy. I find that removing Hukou could increase China's income by 4.7%, and would substantially impact some of China's small neighboring economies. This is because removing Hukou increases the relative price of agricultural goods, which benefits net agricultural exporters such as Thailand and hurts net agricultural importers such as Sri Lanka and Bangladesh.

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