Working Papers and Papers Under Review: 

1.   Endogenous Imitation And Technology Absorption In A Model Of North-South Trade

Anusua Datta, Hamid Mohtadi. International Economic Journal, 2006

Abstract:

This paper considers the transfer of technology from the North to the South that occurs through trade in high-technology goods and explicitly models the “reverse-engineering” process that allows the South to assimilate new technologies.  A key finding of this study is that the South’s rate of growth is dictated by the size of the country’s human capital, which determines its absorptive capacity and its ability to assimilate knowledge from the North.  We find that while a Southern country that is poor in human capital can only imitate, Southern countries that possess sufficiently large human capital endowments, beyond a certain threshold, signal the onset of innovation. We also find that the North enjoys a higher rate of innovation and growth with trade than without. North’s gains are the highest when it trades with a human-capital “poor” South, because imitation increases South’s demand for Northern intermediates.  But trade with the Southern countries that are human capital rich (and therefore involved in innovation), dampens their demand for Northern imports, adversely affecting North’s growth. The model predicts growth convergence between the North and a South that is well passed the threshold for innovation.

2.   Prescription Drug Expenditures in the U.S.: The Effects of Obesity, Demographics and New Pharmaceutical Products

Donald Vandegrift, Anusua Datta. Southern Economic Journal, 2006.

Abstract:

During the period 1990-98, real per-capita expenditures on prescription drugs in the U.S. increased by 84% (1996 dollars-GDP Deflator). This paper examines the factors driving prescription drug expenditures in the U.S. and provides some quantitative measures. Panel data from all 50 U.S. states for the period 1990-98 are employed. The analysis suggests that in addition to an aging population, changes in income, obesity, and new drug approvals are important determinants of rising prescription drugs expenditures. Overall, the estimates suggest that about 8% of the increase in spending on prescription drugs over the period 1990-98 can be explained by the increase in obesity. Rising real incomes account for about 55% of the increase. Increases in the percentage of the population over 65 and new drug approvals exert a significant positive effect on per-capita prescription drug expenditures. Finally, increases in the unemployment rate exert a significant negative effect per-capita prescription drug expenditures.

3.   NAFTA  and the Realigment of Textile and Apparel Trade: Trade Creation or Trade        Diversion?

Anusua Datta and Mikhail Kouliavtsev. Review of International Economics (forthcoming)

Abstract:

The passage of NAFTA in 1994 had a profound impact on the U.S. textile and apparel trade not just within the region but also the transnational regions beyond the member countries themselves. NAFTA is reconfiguring the structure of production and trade in textiles and apparel, as U.S. firms increasingly redirect their attention Mexico, and away from Asia, as a low wage country with a well-developed production base and geographical proximity. We investigate the extent to which a change in tariffs or their removal (as in the case of Mexico and Canada under NAFTA) alters the composition of U.S. textile trade, along with the effects of currency exchange rates and labor wages in exporting countries.

A modified version of the partial equilibrium gravity model, originally proposed by Fukao, Okubo and Stern (2003), is employed to investigate the changing patterns of U.S. textile trade.  We use the data on US Bilateral Manufacturing Imports and Exports by SIC4, which covers the period 1989 to 2001 (Feenstra, Romalis, and Schott 2002), to assess the impact of these factors before and after the creation of NAFTA.  Unlike many previous studies, we also consider the effect of tariff removals under NAFTA on U.S. trade with non-NAFTA nations.  The analysis is performed at the 2-digit industry level as well as the more disaggregated 4-digit sector level.  We conclude that there is little evidence of trade diversion in textiles frequently attributed to NAFTA, while trade creation is clearly present.  Furthermore, lower wages in some textile-exporting countries (e.g., countries in Asia) do not appear to significantly increase these countries’ share of U.S. textile imports at the expense of other trading partners.  Variations in currency exchange rates and tariffs, on the other hand, have substantial effects on the composition of U.S. imports.