Three Topics in Trade Policy

Project: Research project

Project Details


This proposal covers research on three topics in international trade. The common link among the three parts of this proposal is the focus on policy issues. The first part develops a model of quality, where quality is seen as the probability of being satisfied by the good. This work has implications for a number of issues in international trade and industrial organization. In standard models of quality, consumers choose to buy one product or another. In contrast to this, it is assumed that a consumer purchases a product knowing that it may fail to 'deliver'. If the product delivers, the customer leaves the market with the product. Otherwise, the customer gets nothing and may wish to reenter the market. Higher quality is merely a higher probability that the product delivers. This possibility of re-sampling is the primary innovation in this model. The model has a number of interesting predictions on pricing, profits and market structure. It also suggests directions for research which provide some new insights into the role of trade policy and the role for government regulation.

The second part looks at the effects of Rules of Origin (ROOs) in Free Trade Areas (FTAs). A good is eligible for zero tariffs in the FTA only if it originates there. ROOs specify conditions which have to be met for such origin to be granted. In earlier work, joint with Anne Krueger, the author looked at the hidden protection inherent in ROOs and how differences in the way that ROOs are specified affect the outcome. The model used was one with constant returns to scale. As a consequence, the results are best interpreted as long run ones. However, in policy circles, much of the interest is in the short to medium run which is the focus of the work proposed here. The work will shed new light on the effects of FTAs on wages and investment.

The third part focuses on how differences in implementation of migration policies affect outcomes and how the implementation procedures of different countries interact. The work will help understand how differences in U.S. immigration policies and those of other countries affect the composition of immigrants to the U.S. as well as how changes in immigration rules in the future could affect the trade and wage patterns in the U.S.

Effective start/end date8/1/007/31/04


  • National Science Foundation: $199,101.00


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