Essays on trade and development

This thesis comprises three essays on trade and development. The first chapter studies how agricultural productivity growth reshapes urban production through spatial demand linkages between cities. Combining novel data on consumption networks in Brazil’s urban hierarchy with spatially heterogeneous gains from the introduction of genetically engineered soybeans, we measure each city’s exposure to productivity growth in its downstream areas. We find two distinct channels of structural transformation: cities directly exposed to higher soy productivity reallocate labor from agriculture to manufacturing, while cities connected to high-growth areas through the urban network shift employment and wages toward services. Disaggregating the service sector by income elasticity of demand and the strength of agglomeration economies, we show that this upstream expansion concentrates in subsectors where both forces are strong, while income-elastic services lacking agglomeration advantages see no growth or even contract. The resulting sectoral reallocation is skill-biased, raising the college wage premium in upstream cities. These findings identify trade in services across cities as a mechanism through which agricultural productivity shapes structural transformation. The second chapter examines the relationship between the institutionalization of a renewable resource market with poorly defined property rights and local crime rates. We focus on the regulation of the donkey hide trade in Brazil, driven by foreign demand for ejiao, a Traditional Chinese Medicine product. Using a quasi-experimental research design, we leverage the timing of regulatory measures alongside spatial variations in donkey populations across Brazilian municipalities to provide causal evidence that the slaughtering of free-roaming donkeys led to an increase in crime and violence. We further explore the role of market illegality, finding that the impact on crime was larger during periods when the trade was illegal in Brazil. Our results carry important policy implications for developing countries grappling with resource booms and weak property rights. These findings emphasize the need for effective regulation, robust monitoring, and enforcement mechanisms to mitigate the social costs associated with natural resource exploitation. The third chapter develops a quantitative, multi-country general equilibrium framework to study the impact of economic growth, dietary restrictions, and food trade policies on global greenhouse-gas emissions (GHG) from agriculture. Motivated by new cross-country relationships between economic development, diet patterns, agricultural technologies, and GHG emissions, our framework features different income elasticities of demand across food products, and multiple agricultural technologies for production across grid cells covering the surface of the Earth, with food products and technologies being heterogeneous in their GHG emissions per calorie. Using our model’s open-economy structure, we propose a simple procedure to estimate the income elasticities without price data. We find that GHG emissions following economic growth are strongly influenced by the general equilibrium effects related to dietary changes, agricultural modernisation, and food supply readjustments. Moreover, compared to food trade policies, dietary restrictions are both substantially more effective in reducing GHG emissions, and more favourable when considering the welfare losses in developing countries.