Published Sep 08, 2022
An examination of theories of international trade. Topics include the gains from trade, theories of trade determination (Ricardian, Heckscher-Ohlin, increasing returns to scale), the effects of tariffs, multinational corporation behaviour, and factor mobility.
Prereq: ECON 301 or 393; Honours students or Economics majors
This advanced undergraduate course discusses selected international trade theories, trade policy and empirical topics representative of recent research. Theory, extensions, applications and empirical tests of models such as: comparative advantage, factor proportions, increasing returns to scale and imperfect competition, heterogeneous agents, trade policy instruments, gravity models, political economy, offshoring, distributional effects and trade and environment may also be covered. The topics are discussed using a combination of graphical, mathematical and empirical economics tools.
| Become familiar with key concepts and institutions in international trade. |
| Have a solid understanding of the economic fundamentals of trade flows and theories, as well as empirical work on trade. |
| Develop an analytical approach to international trade policy making. |
| Understand some trade policy interactions with other public policy areas such as: environment, inequality, labour. |
Students are required to read the assigned articles, textbook chapters and are encouraged to skim-read the supplementary readings for every section. Please note that this list is tentative and changes to the weekly reading list are likely. The final set of readings will depend on the class background and interests, and will be announced in class and posted on UW-Learn for each upcoming week of classes.
Week | Date | Topic | Readings Due |
|---|---|---|---|
1 | tba | International Trade: Stylized facts. The Gains from Trade | slides Helpman and Krugman, 1985, pp. 28-29 + TBA |
2 | tba | International Trade Driven By Technology Differences: the Ricardian Model | Dornbusch, Rudiger, Stanley Fischer, and Paul A. Samuelson. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods." American Economic Review 67 (1977): 823-839 Deardorff, Alan V. "The General Validity of the Law of Comparative Advantage." Journal of Political Economy, no. 5 (1980): 941-957. Bernhofen, Daniel, and John Brown. "A Direct Test of the Theory of Comparative Advantage: The Case of Japan." Journal of Political Economy 112, no. 4 (2004): 48-67. Arnaud Costinot and Dave Donaldson. "Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence", AER Papers and Proceedings 2012, 102(3): 453-458. + TBA |
3 | tba | The Specific Factors Model | Krugman & Obstfeld chapter 3 (ninth or older than seventh versions only) or Feenstra & Taylor chapter 3 or (more advanced) Markusen et al. chapter 9 Helpman: chapter 3 + TBA |
4 | tba | International Trade Driven by Factor Endowments: the Heckscher-Ohlin-Samuelson Model | Helpman: chapter 2 Feenstra (2003) chapters 1, 2, and 3. Helpman and Krugman (1985) chapter 1. Donald R. Davis and David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), p. 1423-1453. Williamson and O'Rourke "The Heckscher-Ohlin Model Between 1400 and 2000: When It Explained Factor Price Convergence, When It Did Not, and Why,"NBER Working Papers 7411. + TBA |
5 | tba | Extensions and Empirical Tests of the H.O. Model |
Daniel Trefler: "International Factor Price Differences: Leontief Was Right!", Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December 1993.
Harrigan, James. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model." American Economic Review 87, no. 4 (1997): 475-94. + TBA |
6 | tba | Increasing Returns. Imperfect Competition and International Trade | Feenstra, ch. 5 Helpman ch. 4 Helpman and Krugman ch. 3, 7, 11 Ethier, "Decreasing Costs in International Trade and Frank Graham's Argument for Protection", Econometrica (1982). Paul Krugman, "Increasing Returns, Monopolistic Competition and International Trade", Journal of International Economics (1979). Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February. Antweiler, Werner, and Daniel Trefler. 2002. "Increasing Returns and All That: A View from Trade ." American Economic Review, 92(1): 93-119. Paul Krugman's Nobel Prize Lecture (video) + TBA |
7,8,9 | tba | Trade Policy Instruments. Trade Policy under Perfect and Imperfect Competition. Trade Agreements and the WTO | Feenstra ch 7,8 Trefler, Daniel. "The Long and Short of the Canada-U.S. Free Trade Agreement." American Economic Review 94, no. 4 (2004): 870-95. Broda, Christian, Nuno Limao, and David E. Weinstein. 2008. "Optimal Tariffs and Market Power: The Evidence." American Economic Review, 98(5): 2032-65. + TBA |
10 | tba | Firms in International Trade. Gravity models | Marc J. Melitz. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity" Econometrica , Vol. 71, No. 6 (Nov., 2003), pp. 1695-1725. Bernard, Andrew, Stephen Redding, and Peter Schott. "Comparative Advantage and Heterogeneous Firms." Review of Economic Studies 74, no. 1 (2007): 31-66. Arkolakis, Costas, Arnaud Costinot, and Andrs Rodrguez-Clare. 2012. "New Trade Models, Same Old Gains?" American Economic Review, 102(1): 94-130. Anderson, James E., and Eric van Wincoop. "Trade Costs." Journal of Economic Literature 42, no. 3 (2004): 691-751. Stephen J. Redding, 2011. "Theories of Heterogeneous Firms and Trade," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 77-105, 09. + TBA |
11 | tba | Other Topics in Trade: Political Economy | Grossman, Gene, and Elhanan Helpman. "Protection for Sale." American Economic Review 84, no. 4 (1994): 833-50.
Goldberg, Pinelopi Koujianou and Giovanni Maggi. 1999. Protection for Sale: An Empirical Investigation. American Economic Review. + TBA |
12a | tba | Other Topics in Trade: Distributional Effects | Autor, David H. David Dorn and Gordon H. Hanson. The China Shock + Untangling Trade and Technology: Evidence from Local Labor Markets. NBER Working Paper (2013). Haskel, Jonathan, Robert Z. Lawrence, Edward E. Leamer, and Matthew J. Slaughter. 2012. "Globalization and U.S. Wages: Modifying Classic Theory to Explain Recent Facts." Journal of Economic Perspectives, 26(2): 119-40. Elhanan Helpman and Oleg Itskhoki and Stephen Redding, 2010."Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, 07. Goldberg, Pinelopi Koujianou, and Nina Pavcnik. 2007. "Distributional Effects of Globalization in Developing Countries." Journal of Economic Literature, 45(1): 39-82. + TBA |
12b | tba | Other Topics in Trade: Trade and the Environment | Copeland, Brian R. and Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
Antweiler, Werner, Brian R. Copeland, and M. Scott Taylor. 2001. "Is Free Trade Good for the Environment?" American Economic Review, 91(4): 877-908. + TBA |
| Title / Name | Notes / Comments | Required |
|---|---|---|
| A. Feenstra, Robert and Alan Taylor, International Trade, any edition, Pearson/Addison-Wesley. | recommended | No |
| A. Paul Krugman, Maurice Obstfeld and Mark Melitz, International Economics: Theory and Policy, any edition, Pearson/Addison-Wesley. | recommended | No |
| A. Charles van Marrewijk (any edition), International Economics (or International Trade), Oxford University Press, any edition. | recommended | No |
| B. Elhanan Helpman, Understanding Global Trade, Harvard University Press (2011). | an entirely non-technical yet rigorous discussion of the evolution of economic thinking about international trade. | No |
| C. Feenstra, Robert (2004 or 2016), Advanced International Trade: Theory and Evidence, Princeton University Press. Also available online via the UW Library. | more advanced | No |
| C. Helpman, Elhanan and Paul Krugman (1987), Market structure and foreign trade: increasing returns, imperfect competition, and the international economy, MIT Press. | more advanced | No |
Note: Additional readings will be provided on LEARN.
| Component | Value |
|---|---|
| Class Participation | 15% |
| Problem Set 1 | 15% |
| Problem Set 2 | 15% |
| Midterm Exam (Oct. 20) | 25% |
| Choice: Final Exam or Final Paper | 30% |
| Optional: Class discussion leading | bonus 10% |
Important notes on grading, assignments and exams:
IMPORTANT NOTE: in the event of documented student illness, participation marks will be waived for the week. In the event of instructor illness that involves more than one class, or in case public health or university protocols change, the class may shift to synchronous remote via Webex or Teams at the same time as the in-person class.
Text matching software (Turnitin) may be used to screen assignments in this course. This is being done to verify that use of all material and sources in assignments is documented. In the first week of the term, details will be provided about the arrangements for the use of Turnitin and alternatives in this course. See Administrative Policy below for more information and links.
Activities for this course may involve recording, in partial fulfillment of the course learning outcomes. This will take place if for any reason we need to conduct our class entirely or in a hybrid format via MS Teams (or equivalent video-conferencing software). You will receive notification of recording via at least one of the following mechanisms: within the Learning Management System (LEARN), a message from your course instructor, course syllabus/website, or other means. Some technologies may also provide a recording indicator. Images, audio, text/chat messaging that have been recorded may be used and/or made available by the University to the course instructor for the purpose of assessment. Recordings will be managed according to the University records classification scheme, WatClass, and will be securely destroyed when no longer needed by the University. Your personal information is protected in accordance with the Freedom of Information and Protection of Privacy Act, as well as University policies and guidelines and may be subject to disclosure where required by law.
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https://uwaterloo.ca/economics/undergraduate/resources-and-policies/deferred-final-exam-policy.
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