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.
Grades are based a tutorial exam (50%) and a final exam (50%).
Main textbook and additional readings
- (F) Feenstra (2009). 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?
- F-T Chapter 1: "Trade in the Global Economy"
- K-O-M chapter 2: “World trade, an overview”
Lecture based on:
- 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)
- F-T: Chapter 6: "Increasing Returns to Scale and Monopolistic Competition"
- K-O-M chapter 6: "Economies of Scale, Imperfect Competition and International Trade"
- ***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. Gravity Rules 3.1 Gravity rules
- 3.2 Theoretical Foundations
- 3.3 Trade with heterogeneity: gravity still rules
4. Oligopolistic competition
- 4.1 Reciprocal dumping
- 4.2 Strategic trade policies
5. Trade Policies
- 5.1 Instruments: tariffs, quotas and export subsidies
- 5.2 Trade policy as a second best instrument