Three Essays on Macroeconomics and Trade

Chapter 2 estimates returns-to-scale at the industry level using the longest consistent dataset available for the U.S. economy. Since the late 1980s, the average estimate is 1, implying constant returns. An intuitive identity linking returns to scale, the markup, and the profit rate, gives a small implied average gross and value-added markups of approximately 5 and 10 percent, respectively, given our measure of the profit rate, over the past 30 years. This gross markup estimate is significantly less than the average gross markup estimates in the recent literature ranging from 30 - 40 percent during this period. Put differently, given our estimated profit rate, large markups imply strongly increasing returns, which are not evident in the aggregate data. Chapter 3 studies the effect of Free Trade Agreements (FTAs) on the exports of already exported products. I use 6-digit bilateral trade data and five FTAs to estimate the dynamic effects of the agreements on Canadian exports to its FTA partners. My difference-in-differences estimates show that (i) the export increases significantly in the short- and long-term for developed FTA partners. (ii) In cases where FTA partners are emerging, the impact is insignificant or negative in the short- and long-term. Regression Discontinuity Design estimates also suggest that the impact of FTA on the exports at intensive margins depends on whether the FTA partners are emerging or developed economies. The final chapter estimates tariff pass-through to the dollar value and unit prices of steel imports and its subsequent effect on domestic markets. Recent studies report that the overall burden of tariffs has entirely passed to U.S. firms and consumers. However, using 10-digits import data from U.S. Customs for 2018-219, I find that: First, foreign exporters have gradually decreased their prices, sharing almost 50 percent of the burden of increased tariffs for all steel products primarily determined by industrial supplies and materials. Second, the price and import elasticities for consumer steel products are substantially higher at 5 and - 8, respectively. Third, the immediate increase in prices of industrial supplies was near 100 percent, which decreased to slightly below 50 percent in the long run.