Essays in determinants of comparative advantage and welfare implications of trade wars

My main research areas are international trade and empirical microeconomics. In the first and second chapter of my PhD dissertation, I use similar empirical methodology clearly identify and analyzing comparative advantage among aging and female labor supply unbalanced countries. The third chapter focus on the effect of US China trade war on the country welfare with intermediate and non-tradable goods.

In the first chapter, we investigate a particular mechanism through which differences in demographic composition across countries affect international trade flows. Some cognitive functions are known to vary across the adult life span, and in particular the ability to update skills and adapt to changes in working conditions. As a country's population is getting older, it becomes increasingly difficult for firms to find workers with up-to-date skills. As a result, countries with aging populations will start losing comparative advantage in industries that rely heavily on workers' ability to adapt to frequent changes in working conditions. We test this hypothesis and find robust empirical evidence for a significant negative effect of population aging on comparative advantage of a country in industries which are intensive in skill adaptability of the labor force, in both the cross-sectional and the dynamic panel data sets.

In the second chapter, we study the effect of female labor supply change on China's international trade. In 1979, the one-child policy (OCP) was introduced in China, many more boys than girls have been born, changing the relative female labor supply. Differences in sex ratios across cities, caused by differences in OCP enforcement, affect availability of gender-dependent skills. These regional differences interact with sector-specific differences in intensities in gender-dependent skills. Other things equal, cities with higher female population share specialize in industries which use female labor intensively. We empirically confirm this insight for the sample of 283 Chinese prefecture cities, using spatial variation in OCP stringency as an exogenous female labor supply shifter. We interpret our results as highlighting the importance of labor force gender composition for industry's productivity. Our results imply that the effect of gender imbalances in labor supply on labor market outcomes, observed in many parts of the world, can be mitigated through international trade by utilizing relatively abundant type of labor in export-oriented industries.

In the third chapter, we use a quantitative general equilibrium trade model to analyze the effect of the US China trade war on welfare of the main countries affected by it. In 2018, the US introduced a 25% import tariff on certain imports from China in an attempt to reduce US China trade deficits and to nudge the Chinese government to abandon its unfair trade practices. Quantitative results suggest that after three rounds of import tariff increase both China and US suffered welfare reductions, by 0.3 and 0.0075 percentage points respectively. At the same time, some other economies benefited from the trade war, especially the ones that are close trade partners to either US or China. We use this model to simulate the effect of the same additional import tariff imposed on randomly selected industries, and find similar reduction in welfare.