Fortgeschrittene Handelspolitik
Advanced Trade and Trade Policy

Course Overview

This course covers the theory of international trade at a level appropriate for advanced masters and PhD students. Emphasis is on both basic theory and application. The goal is to gain a working knowledge of standard analytical tools, and a familiarity with current research topics in trade and the real side of international economic policy. This includes dual general equilibrium theory, commercial policy and regional integration, theories of industrial location and agglomeration, trade and the distribution of income, and trade and accumulation/growth. It also includes the recent empirical literature on testing this body of theory (policy determination, trade and FDI flows, firm-level evidence on productivity and openness, openness and inequality)..

Readings:

J.N. Bhagwati, A. Panagariya, and T.N. Srinivasan, Lectures on International Trade, second edition, MIT Press, 1998. (Required sections are in the electronic reader. They are designated as BPS in the reading list).

A Dixit and V. Norman, Theory of International Trade, Cambridge University Press: Cambridge, 1980. (Required sections are in the reader. They are designated as DN in the electronic reading list).

R.C. Feenstra, Advanced International Trade: Theory and Evidence, Princeton University Press: Princeton, 2003, ISBN: 0-691-11410-2. (Required sections are in the electronic reader. They are designated as DN in the reading list)

I. Preliminaries: Dual Representations of General Equilibrium

1. The Expenditure and GDP Function
2. Patterns of Trade
3. Gains From Trade

* A Dixit and V. Norman, Theory of International Trade, Cambridge University Press: Cambridge, 1980/1986: CHAPTER 2.
* R.C. Feenstra, Advanced International Trade: Theory and Evidence, Chapter 1.
* A Dixit and V. Norman, Theory of International Trade, Cambridge University Press: Cambridge, 1980/1986: TECHNICAL ANNEX.

II. Perfectly Competitive Trade Models

1. The Ricardian Model
2. The Ricardo-Vine Model
3. The Heckscher-Ohlin Model
4. The de Melo-Robinson Model
5. External Scale Economies

* A Dixit and V. Norman, Theory of International Trade, Cambridge University Press: Cambridge, 1980/1986: CHAPTER 3 .
* A Dixit and V. Norman, Theory of International Trade, Cambridge University Press: Cambridge, 1980/1986: CHAPTER 4.
* Caves, R.E. and R.W. Jones, “The Specific Factors Model of Production,” and “The Two-Sector Heckscher-Ohlin Model, ” suppplement to Chapters 6 and 7 of World Trade and Payments. Little, Brown, (various additions).
Dornbusch, R., S. Fischer and P. Samuelson, “Comparative Advantage, Trade, and Patterns in a Ricardian Model with a Continuum of Goods,” American Economic Review, 67(5), December 1977: 823-839.
Jones, R.W., "The Structure of Simple General Equilibrium Models," Journal of Political Economy_73 (December 1965), 557-572.
Deardorff, A.V., "Weak Links in the Chain of Comparative Advantage," Journal of International Economics 9 (May 1979), 197-209.
*J. de Melo and S. Robinson, "Product Differentiation of Foreign Trade in Computable General Equilibrium Models," Journal of International Economics 27 (1989), 47-67.

III. Imperfectly Competitive Trade Models

1. Oligopoly
2. Monopolistic Competition
3. Monoposony

*J.N. Bhagwati, A. Panagariya, and T.N. Srinivasan, Lectures on International Trade, second edition, MIT Press, 1998: CHAPTER 11.
*J.N. Bhagwati, A. Panagariya, and T.N. Srinivasan, Lectures on International Trade, second edition, MIT Press, 1998: CHAPTER 30.
Brander, J. and P. Krugman, “A ‘Reciprocal Dumping’ Model of International Trade,” Journal of International Economics 15, 1983: 313-321.
Krugman, P., "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review 70 (December 1980), 950-959.
Ethier, W.J., "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review 72 (June 1982), 950-959.
* J. Francois and D. Nelson, “A Geometry of Specialization,” Economic Journal, July 2002, 649-678.
Melitz, M., “The Impact of Intra-Industry Reallocations and Aggregate Industrial Productivity,” Econometrica, November 2003, 1695-1725.
Francois, J. and I. Wooton, “Market Structure and Market Access,” CEPR discussion paper 2006.

IV. International Trade Policy

1. Efficiency and Optimal Policy
2. Equity and Trade
3. Endogenous Policy Formation
4. Regionalism

*A Dixit and V. Norman, Theory of International Trade, Cambridge University Press: Cambridge, 1980/1986: CHAPTER 5 .
*A Dixit and V. Norman, Theory of International Trade, Cambridge University Press: Cambridge, 1980/1986: CHAPTER 6 .
* R.C. Feenstra, Advanced International Trade: Theory and Evidence, Chapter 7.
* R.C. Feenstra, Advanced International Trade: Theory and Evidence, Chapter 9 .
Hillman, A.L., “Declining Industries and Political-Support Protectionist Motives,” American Economic Review, vol 72(5), December 1982.
Mayer, W., “Endogenous Tariff Formation,” American Economic Review, vol 74(5), December 1984: 970-985.
Hillman, A.L. and H.W. Ursprung, “Multinational Firms, Political Competition, and International Trade Policy,” International Economic Review, 32(2), May 1993: 347-363.
*Grossman, G. and E. Helpman, “Protection for Sale,” American Economic Review, 84(4), September 1994: 833-850.
*Bhagwati, J., Greenaway, D. and A. Panagariya, "Trading Preferentially: Theory and Policy," The Economic Journal 108(July 1998), 1128-1148.
Syropolous, C., “On Tariff Preferences and Delegation Decisions in Customs Unions: A Heckscher-Ohlin Approach,” the Economic Journal, vol 112, July 2002: 625-648.
Francois, J. and H. Rojas-Romagosa, “Equity, Welfare, and the Setting of Trade Policy in General Equilibrium,” World Bank discussion paper 2005.

V. International Competition Policy

1. Merger Policy
2. Regulating Anticompetitive Behaviour
3. Trade and Monopsony

*Acquier, A. and R. Caves, “Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy,” the Economic Journal, vol 89, 1979: 559-581.
Weinstein, D.E., “Competition and Unilateral Dumping,” Journal of International Economics, 32, 1992: 379-388.
Head, K. and J. Ries, “International Mergers and Welfare Under Decentralized Competition Policy,” The Canadian Journal of Economics, vol 30(4b), November 1997: 1104-1123.
J.F. Francois and I. Wooton. "Market Structure, Trade Liberalization, and the GATS,” European Journal of Political Economy, 2001, 17: 389-402.
Horn, H. and J. Levinsohn, “Merger Policies and Trade Liberalization,” the Economic Journal, vol 111, April 2001: 244-276.
*J.F. Francois. and H. Horn. "Antitrust in Open Economies," published in The Political Economy of Antitrust, North Holland (2007)..
Francois, J. and I. Wooton, “Market Structure and Market Access,” CEPR discussion paper 2006.

VI. Empirics

1. Directions of Trade and Gravity Models
2. Trade and Functional Income Distribution
3. Testing Theories of Policy Formation

Anderson, J.E. “A Theoretical Foundation for the Gravity Equation,” The American Economic Review, vol 69(1), March 1979: 106-116.
* R.C. Feenstra, Advanced International Trade: Theory and Evidence, Chapter 9 .
Finger, J.M., H.K. Hall and D. Nelson, “The Political Economy of Administered Protection,” American Economic Review, vol 72(3), September 1981: 452-466.
*Trefler, D. “Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy,” Journal of Political Economy, vol 101(1), February 1993: 138-160.
*Francois, J.F. and D. Nelson, "Trade, Technology, and Wages: General Equilibrium Mechanics," Economic Journal 108 (September 1998), 1483-1499.
*R. Feenstra, J. Markusen, and A.K. Rose, "Using the Gravity Model to Differentiate Among Alternative Theories of Trade," Canadian Journal of Economics, 2001.
*Anderson, J. and E. van Wincoop (2003). “Gravity with Gravitas: A Solution to the Border Puzzle” American Economic Review 93(1): 170-192.
Francois, J.F., K. Grier and D. Nelson, “Globalization, Roundaboutness, and Relative Wages,” CEPR/Tinbergen Institute discussion paper, 2004.
*R. Feenstra and G. Hanson, “Global Production Sharing and Rising Inequality: A Survey of Trade and Wages,” in Choi E.K. and J. Harrigan (eds.) Handbook of International Trade, Blackwell: Malden, MA, 146-185, 2005.
*Imai, S. H. Katayama and K. Krishna, “Is Protection Really for Sale? A Critique of the Common Approach in Testing the G-H Model,” paper presented at the European Trade Study Group annual conference, Dublin September 2005.

VII. FDI & Multinational Enterprises

Krugman, P. “The ‘New Theories’ of International Trade and the Multinational Enterprise,” in C.P. Kindelberger and D.B. Audretsch eds., The Multinational Corporation in the 1980s, MIT Press:Cambridge, 1983.
Helpman, E., “A Simple Theory of International Trade with Multinational Corporations,” The Journal of Political Economy, June 1984, 92(3): 451-471.
Helpman, E. “Multinational Corporations and Trade Structure,” Review of Economic Studies, LII, 1985: 443-457.
Ethier, W.J. “The Multinational Firm,” The Quarterly Journal of Economics, 101(4), November 1986: 805-834.
*Markusen, J.R., “The Boundaries of Multinational Enterprise and the Theory of International Trade," Journal of Economic Perspectives, 9(2) Spring 1995: 169-189.
*Markusen, J.R. and A.J. Venables, “Multinational Firms and the New Trade Theory,” Journal of International Economics, 46, 1998: 183-203.

VIII. Migration

1. Economic Migration
2. Migration and Wages
3. Migration and Social Capital

Ethier, W.J., "International Trade and Labor Migration," American Economic Review, September 1985 75(4): 691-707.
*Ethier, W.J., "Illegal Immigration: The Host-Country Problem," American Economic Review, March 1986 76(1): 56-71.
*Borjas, G.J. "The Economic Benefits of Immigration," Journal of Economic Perspectives Spring 1995, 9(2): 3-22.
Borjas, G.J. and L. Hilton, "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," Quarterly Journal of Economics, May 1996: 575-604.
*Borjas, G.J. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration On The Labor Market," Quarterly Journal of Economics, November 2003: 1335-1374.
Felbermayr, G.J. and Kohler, W. "Immigration and Native Welfare," Eberhard Karls University Tübingen 2005.

IX. Dynamics and Growth

1. Capital Accumulation in Steady State
2. Transition Dynamics
3. Innovation and Endogenous Growth

*J.N. Bhagwati, A. Panagariya, and T.N. Srinivasan, Lectures on International Trade, second edition, MIT Press, 1998: CHAPTER 36.
*J.N. Bhagwati, A. Panagariya, and T.N. Srinivasan, Lectures on International Trade, second edition, MIT Press, 1998: CHAPTER 37.
Bhagwati, J. "Immiserizing Growth: A Geometrical Note," Review of Economic Studies (June 1958).
Atsumi, H., "The Long-Run Offer Function and a Dynamic Theory of International Trade," Journal of International Economics 1 (1971), 267-299.
Fischer, S. and J.A. Frenkel, "Investment, the Two-Sector Model, and Trade in Debt and Capital Goods," Journal of International Economics 2 (August 1972), 211-233.
*Grossman, G.A. and E, Helpman, "Product Development and International Trade," Journal of Political Economy 97 (December 1989), 1261-1283.
Manning, R. and J. Markusen, "National Product Functions in Comparative Steady-State Analysis," International Economic Review 32 (August 1991), 613-624.
*Deardorff, A.V. “Rich and Poor Countries in Neoclassical Trade and Growth,” the Economic Journal, vol 111, April 2001: 277-294.