ESSAYS IN INTERNATIONAL ECONOMICS USING FIRM-LEVEL DATA Public Deposited

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  • March 22, 2019
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  • Rhee, Jennifer
    • Affiliation: College of Arts and Sciences, Department of Economics
Abstract
  • My dissertation empirically investigates implications of macroeconomic models using firm-level market and accounting data. As Konchitchki and Patatoukas (2014) states, ''macroeconomics research has evolved independently from accounting research, which is typically conducted at the firm level'' and ''the link between accounting earnings and macroeconomy remains relatively unexplored.'' This paper is part of the growing body of literature that attempts to fill this gap by highlighting macroeconomic insights that can be obtained from the micro-level analysis. The first two chapters of my dissertation investigate Lucas Paradox and the neoclassical model, and the last chapter studies Heckscher-Ohlin model of trade. Neoclassical theory predicts that if two countries share the same constant return to scale production function, and trade in capital goods is free and competitive, due to the law of diminishing returns (a) new investment will occur only in capital-scarce countries since (b) the marginal product of capital should be higher in economies with less capital. This statement at the heart of Lucas paradox, implicitly assumes that cross-country marginal products of capital mirror cross-country financial investment returns. In the first chapter, I show using firm-level data that although firms in emerging markets enjoy higher marginal products of capital, financial investment returns are roughly equalized across developed and emerging economies. The finding questions the validity of the standard approach that uses differences in marginal products of capital to explain international capital flows. It further suggests that "there is no prima facie support for the view that international credit frictions play a major role in preventing capital flows from rich to poor countries" (Caselli and Feyrer, 2007). The paper also highlights the importance of cross-country differences in capital efficiency to explain the observed patterns of financial returns. The second chapter further investigates capital efficiency differences across countries and suggests potential modifications to the standard capital accumulation model. It also uses variables that are commonly employed in the macroeconomic growth literature and examine their effect on the capital efficiency of firms. The third chapter investigates single-cone Heckscher-Ohlin model of specialization, which is one of the most heavily used general equilibrium model of international trade. The theory suggests that if countries share identical technology, then they export goods that intensively use the factors of production that are relatively abundant locally and this leads to a global factor price equalization even in the absence of international factor mobility. In this chapter, I empirically investigate implications of the single-cone Heckscher-Ohlin model using firm-level accounting and market data. I find a systematic relationship between firm return to capital and aggregate relative endowment, which imply a weak link among international factor prices. This finding, which is consistent with Schott (2003, 2004), rejects commonly used single-cone model in favor of the multi-cone model with intra-industry specialization and suggests that trade liberalization can only have a limited effect on the factor price convergence across countries.
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Advisor
  • Landsman, Wayne
  • Chari, Anusha
  • Alder, Simon
  • Hendricks, Lutz
  • Kim, Ju Hyun
Degree
  • Doctor of Philosophy
Degree granting institution
  • University of North Carolina at Chapel Hill Graduate School
Graduation year
  • 2018
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