Farid Toubalpac

This course will provide students with the analytical tools that are essential to understand the process of globalization through the international trade in goods. The lecture focuses on topics that are at the center of the policy debate: why do countries open to trade? What are the gains from trade? What are the distributional impacts of trade between and within countries 

At the end of the course, students are expected to have a good knowledge of the mechanisms and predictions from modern trade theories. Students will also be able to read research articles that can be used for the writing of policy notes.  

The material covered is not mathematically complex, but it is taught in a formal and rigorous manner, which assumes a good familiarity with basic economic concepts.  

Evaluation 

Grades are based a tutorial exam (50%) and a final exam (50%). 

Main textbook and additional readings 
  • (F) Feenstra (2016). Advanced International Trade: Theory and Evidence. Princeton University Press.
  • (FT) Feenstra R.C., Taylor A., (2008). International Economics. Worth Publisher, 2nd Ed.
  • (K-O-M) Krugman P., Obstfeld M., and Melitz M., (2008). International Economics: Theory and Policy. Pearson, 9th Ed.
  • (C-M-T) Combes P.P, Mayer T. and J., Thisse (2008) Economic Geography, Princeton University Press
  • Additional reading may complete the K-O-M  and C-M-T chapters and will be provided before the lectures. Feenstra provides an excellent lecture too.

Telos and Vox are two blogs that publish research-based policy articles from leading economists. A lot of the articles cover trade-related topics.

A very nice short and non-mathematical summary of international trade for a general interest audience is Helpman, Elhanan (2011): Understanding Global Trade. Belknap Harvard. 

1. Definitions, Broad Facts, and Road Map for the Course – Print

    • 1.1 Globalization: definition
    • 1.2 Globalization a new phenomenon?

    Readings

    • F-T Chapter 1: "Trade in the Global Economy"
    • K-O-M chapter 2: “World trade, an overview

    Lecture based on:

    • https://ourworldindata.org/
    • Baldwin, R. And Martin, P. (1999): “Two waves of globalization: superficial similarities, fundamental differences”, NBER Working Paper 6904
    • Kevin O'Rourke and Jeffrey Williamson. Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy, MIT Press.
    • Gojko Barjamovic, Thomas Chaney, Kerem Cosar, Ali Hortaçsu (2019). Trade, Merchants, and the Lost Cities of the Bronze Age, The Quarterly Journal of Economics, Volume 134, Issue 3, Pages 1455–1503.
    • Cécile Michel, (2008). The Old Assyrian Trade in the light of Recent Kültepe Archives. Journal of the Canadian Society for Mesopotamian Studies, 2008, pp.71-82.

2. Monopolistic competition and trade – Print

    • 2.1 A refresher on monopolistic competition … and trade (Krugman, 1979)
    • 2.2 Monopolistic competition with homogeneous firms (Krugman, 1980)
    • 2.2 Monopolistic competition with heterogeneous firms (Melitz, 2003)

    Readings

    • F-T: Chapter 6: "Increasing Returns to Scale and Monopolistic Competition"
    • K-O-M chapter 6: "Economies of Scale, Imperfect Competition and International Trade"
    • Melitz, M. J., and S. J. Redding. 2014. "Heterogeneous Firms and Trade", Handbook of International Economics, 4th ed, 4: 1-54. Elsevier.
    • ***C-M-T chapter 3
    • Feenstra, Chapter 2 & Chapter 10
    • A Reminder on Optimization

    Lecture based on:

    • Krugman, P. R. (1979). Increasing returns, monopolistic competition, and international trade. Journal of international Economics, 9(4): 469-479.
    • Krugman, P. R. (1980). Scale Economies, Product Differentiation and the Pattern of Trade. American Economic Review, 70(5): 950-959.
    • Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6): 1695-1725.

3. The Law of Gravity Print

    • 3.1 Introduction
    • 3.2 Micro-Foundations for the Gravity Equation
    • 3.3 Empirical Evidences and Applications

    Readings (extraordinary ressources)

    Lecture based on:

4. Oligopoly and Trade Print

    • 4.1 Is Oligopoly Empirically Important ?
    • 4.2 Reciprocal Dumping
    • 4.3 Quantity Competition and Welfare
    • 4.4 Price Competition and Welfare
    • 4.5 Strategic Trade (and Industrial) Policy

    Readings

    • Brander, J. A. and Krugman, P. R. (1983). A ‘reciprocal dumping’ model of international trade. Journal of International Economics, 15(3):313–321.
    • Brander, J. A. and Spencer, B. J. (1981). Tariffs and the extraction of foreign monopoly rents underpotential entry. Canadian Journal of Economics: 371–389.
    • Very Interesting Review: Head, K., & Spencer, B. J. (2017). Oligopoly in international trade: Rise, fall and resurgence. Canadian Journal of Economics, 50(5): 1414-1444.
    • Neary, P.J. (2010). Two and a half theories of trade. World Economy, 33(1): 1-19.

    Lecture based on:

    • Brander, J. A. and Krugman, P. R. (1983). A ‘reciprocal dumping’ model of international trade. Journal of International Economics, 15(3):313–321.
    • Brander, J. A. and Spencer, B. J. (1984). Tariff protection and imperfect competition. In Kierzkowski, H., editor, Monopolistic competition and international trade, pages 194–206. Clarendon Press - Oxford.
    • Brander, J. A. and Spencer, B. J. (1985). Export subsidies and international market share rivalry.Journal of International Economics, 18(1):83–100.
    • Head, K., & Spencer, B. J. (2017). Oligopoly in international trade: Rise, fall and resurgence. Canadian Journal of Economics/Revue canadienne d'économique, 50(5), 1414-1444.
    • Leahy, D., & Neary, J. P. (2013). Oligopoly and trade. In Palgrave handbook of international trade (pp. 197-235). Palgrave Macmillan, London.

5. Trade Policies Print

    • 5.1 A general model of trade protection
    • 5.2 Trade war
    • 5.3 Political Economy of trade policy

    Readings

    Lecture based on:

    • Feenstra (2016). Advanced International Trade: Theory and Evidence. Princeton University Press.
    • Grossman, G., & Helpman, E. (1994). Protection for Sale. American Economic Review, 84(4), 833-850.
    • Goldberg, P. K., & Maggi, G. (1999). Protection for sale: An empirical investigation. American Economic Review, 89(5), 1135-1155.
    • Blanga-Gubbay, M., Conconi, P., & Parenti, M. (2020). Lobbying for Globalization. CEPR Discussion Paper 14597. (Previously circulated as "Globalization For Sale").