Three Essays on International Trade and Productivity

Abstract

In this thesis I examine, through three papers, the links between international trade and productivity. Two of these papers examine the impact of international trade on productivity and the final paper examines the impact of productivity onthe patterns of international trade.

The first paper investigates the extent to which changes in the origin of a country's imports impact productivity, once changes in the overall volume of trade are accounted for, through an examination of the impact of the shift in UK imports away from the EU and towards Non-EU countries around the time of the Great Recession on UK productivity. The second paper analyses the impact of the endogenous response of less productive non-trading domestic firms on the
behaviour of labour productivity in response to
macroeconomic shocks, through the development of a new DSGE model of trade and productivity. The third paper explores the extent to which the relative bilateral flows of international trade are explained by relative productivity differences, i.e. the extent to which these flows are driven by Ricardian Comparative Advantage.

The key findings of this thesis are: first, changes in the origin of a country's imports can significantly impact its productivity, even once changes in the overall volume of trade are accounted for. Second, the endogenous response of less productive non-trading domestic firms is a key driver of the response of productivity to macroeconomic shocks. Third, although Ricardian Trade Theory holds across a wide range of countries and industries, consistent with the existing literature, only a very small percentage of the relative bilateral flows of international trade can be
explained by differences in relative productivities.