My dissertation consists of three self-contained essays in international and development economics. The first and third chapters are solely authored. The second chapter is co-authored with Arpita ...Chatterjee and Jade Vichyanond. The first chapter studies trade-induced transitional dynamics by estimating a structural dynamic equilibrium model of the labor market. The model features a multi-sector economy with overlapping generations, heterogeneous workers, endogenous accumulation of sector-specific experience and costly switching of sectors. The estimation employs a large panel of workers constructed from Brazilian matched employer-employee data. The model’s estimates yield high average costs of mobility that are very dispersed across the population. In addition, sector-specific experience is imperfectly transferable across sectors, leading to additional barriers to mobility. Using the estimated model as a laboratory for counterfactual experiments, this paper finds that: (1) there is a large response of the labor market following trade liberalization but the transition may last several years; (2) potential aggregate welfare gains are significantly mitigated due to the slow adjustment; (3) trade-induced welfare effects are very heterogeneous across the population; (4) retraining workers initially employed in the adversely affected sector may reduce losses incurred by these workers and increase aggregate welfare; (5) a moving subsidy that covers costs of mobility is more promising in compensating losers, although at the expense of higher welfare adjustment costs. The experiments also highlight the sensitivity of the transitional dynamics with respect to assumptions regarding the mobility of physical capital. The second chapter studies the effect of exchange rate shocks on the pricing decisions of multi-product firms. We construct a model to illustrate how firms adjust their prices, as well as quantities and product scope, in the event of an exchange rate depreciation. Firms’ markups depend on their productivity levels and local distribution costs. Each firm faces a product ladder, according to which marginal costs of production are higher for products further away from the firm’s core competency. In response to a real exchange rate depreciation, firms increase producer prices more for products closer to their core competency. We also show how the adjustments that firms undertake lead to a change in the distribution of sales across products. We then assess the predictions of the model on a rich Brazilian firm-level dataset that contains destination-specific and product-specific export values and volumes spanning the period of 1997–2006, during which Brazil experienced a series of drastic currency fluctuations. After controlling for industry and destination characteristics, we find that within-firm heterogeneity across products is an important determinant of exchange rate pass-through. In the third chapter, I investigate whether crime prevalence reduces the educational attainment of children in Brazil. The identification strategy relies on the fact that men are overwhelmingly more likely to be involved in crime and violence than women. Men are also more likely to suffer from the consequences of crime such as being killed or being arrested. Consequently, if crime affects schooling decisions, it should affect the decisions of boys more than those of girls. My findings indicate that the enrollment rates of boys are indeed more affected by crime rates than those of girls. I also find that this impact exists only for children living in households in the first three or four deciles of the per capita income distribution. Homogeneity of this effect across ages cannot be rejected. Finally, changes in crime rates seem to have a nonlinear impact on schooling decisions: the impact is very small when changes are small and much larger when changes are large.
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