Download or read book Essays in International Trade, Political Economy of Protection and Firm Heterogeneity written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The first two chapters study the effect of foreign lobbies on trade policy of a country which is a member of a Free Trade Agreement (FTA). They rely on a monopolistically competitive political economy model in which the government determines external tariffs endogenously. In the first paper the effect of foreign lobbying under the FTA is examined empirically using Canadian industry-level trade data that allow differentiating of lobby groups by the country of origin. The analysis suggests that the presence of foreign lobbying has a significant effect on the domestic trade policy: the presence of an organized lobbying group in an FTA partner country tends to raise trade barriers while an organized lobbying group of exporters from outside of the FTA is associated with less protection. The second paper analyses political viability of FTAs and their effect on the world trading system in the presence of lobbying by organized foreign interest groups. I show that the FTA in the presence of an organized lobby group in a prospective partner country may cause an increase in the level of protection against imports from third countries and impede trade with non-member countries. I also find that foreign lobby may encourage the local government to enter a welfare-reducing trade-diverting FTA. Finally, I show that the FTA increases the lobbying power of the organized lobby groups of the member countries, which can potentially obstruct the viability of welfare-improving multilateral trade liberalization. The last paper shows that the reason for a higher capital-labor ratio observed for exporting firms is a higher capital intensity of their production technology. Exporters are more productive, more likely to survive and, hence, more likely to repay loans. A higher repayment probability causes creditors to charge lower interest rate and reduces the marginal cost of the firm when a more capital-intensive technology is used. Here, a reduction in international trade costs stimulates exp.