International trade

Objective

This course gives a detailed overview of both the traditional and the most recent theories of international trade. Its purpose is to provide the students with a “toolbox” that can later be used to treat various questions related to the determinants of international trade flows. While the emphasis is on the theoretical aspects of the field, we will systematically discuss how the main predictions of the studied models fit the data. For each workhorse model, we will try to provide a number of references which use that particular framework to ask more applied questions.

Evaluation and expected learning outcomes

Final exam (100%). The exam will be composed of a short essay question and a problem.

Sample exams with solutions are downloadable from Pamplemousse.

At the end of this course we expect students to be able to:

-          work out the analytics of the basic HOS, EK and Melitz models of international trade

-          explain to what extent the theoretical models are consistent with empirical findings, and how they can be used to interpret the results of gravity equations

-          discuss how the models shed light on the determinants of trade patterns and gains from trade

-          solve a problem based on a simple extension of one of the models seen in class

Planning

Outline

The 8 three-hour lectures will be organized as follows:

Oct 2, 2019

1.       Introduction

Stylized facts.

2.       Ricardo & Dornbusch Fischer Samuelson (1977).

Feenstra, chap.1

Oct 9, 2019

3.       Heckscher-Ohlin-Samuelson 2x2x2 model

Feenstra, chap.1-2

Oct 16, 2019

4.       HOS with more goods and factors: Heckscher-Ohlin Vanek & Dornbusch Fischer Samuelson (1980)

Feenstra, chap.3

5.       Empirical performance of neoclassical trade models: Trefler (1995), Davis and Weinstein (2001)

Feenstra, chap.3

Oct 30, 2019

6.       Neoclassical trade models (5/6)

Eaton and Kortum (2002)

Online Appendix

Nov 6, 2019

7.       Imperfect competition and Trade in Differentiated Varieties (1/2)

From Krugman (1980) to Melitz (2003)

Handbook, chap. 1

8.       Imperfect competition and Trade in Differentiated Varieties (2/2)

Extensions of Melitz (2003) and empirical evidence on firms and trade.

Handbook, chap. 1

Nov 13, 2019

9.       Gravity equations: theory (Anderson van Wincoop 2003) and estimation.

Handbook, chap. 3

Nov 20, 2019

10.   Quantifying gains from trade: gravity-based models (Costinot Rodriguez 2014), natural experiments.

Handbook, chap. 3

Nov 27, 2019

11.   Fragmentation

Value-added trade. Offshoring model (Grossman Rossi-Hansberg 2008).

Reading list.

References

References

The course will rely on the two following textbooks. Some chapters will rely on articles or supplementary material, which will be posted on Pamplemousse.

Feenstra: Robert C. Feenstra (2003), Advanced International Trade: Theory and Evidence, Princeton University Press, ISBN: 9780691114101

Handbook: Handbook of International Economics, Volume 4, Pages 1-740 (2014), Edited by Gita Gopinath, Elhanan Helpman and Kenneth Rogoff, North-Holland, ISBN: 978-0-444-54314-1