AbstractsEconomics

The overarching theme of my research is on issues related to innovation, with a focus on how different firms react to technological changes. These include new markets that are developed through international trade agreements, new production technology as a product of research and development (R&D), and even new regulations and standards that change the production process of a firm. We divide these changes into several categories, by whether they are mandatory or voluntary, whether they are 'horizontal' or 'vertical', or whether they are 'direct' or 'secondary' effects of a social change. First, we look at the responses of countries when mandatory changes are exogenously imposed. In order to do this, we look at the case of how international labor standards impact bilateral trade. Through this estimation, we examine how countries react not only in terms of adopting the standards, but also how they react when their trading partners adopt more standards. The impact of such technological change is heterogeneous across conventions and industries. We find that the international standards significantly explain the extensive margin of trade, but less of the intensive margin of trade. Second, we look at the endogenous responses of firms to market forces and firm level constraints. We model a firm which has an option to invest and improve their own productivity. A theoretical examination shows that the general equilibrium effect of innovation is positive by increasing consumer welfare through lower prices and added variety of goods. The model also shows policy implications related to market entry costs such as RD subsidies. Last, we look at technological changes as an externality. The case we examine is when technology is introduced due to the behavior of other firms. We look at the case of Chile, and examine how foreign direct investment (FDI) impact the exit behavior of firms. We see that survivability of domestic firms is effected by the behavior of multinationals, and that the level of technology of the industry is a significant factor in determining exit rates. Advisors/Committee Members: Poczter,Sharon Leona (committeeMember), Kanbur,Ravi (committeeMember).