Empirical International Economics
- It is expected that the students will learn how to apply these concepts to better understand the problems international economists study: the structure and volume of trade flows, gains from trade, trade policy issues
- the course will briefly explain how the basic models of international economics are developed and used to study the relevant economic questions.
- Introduction. Stylized facts about international tradeWe start with the first look at the aggregate trade data and the importance of trade for the global economy. We confront basic facts about the international trade: its unprecedented growth in the recent decades; role of sea transport in trade; prevalence of the manufacturing goods in trade volumes. Finally, we have study the gains from trade assessment recovered from reduced form estimation.
- Comparative advantageWe cover Ricardo’s theory of comparative advantage. We start from simple two goods model and extend it to the many goods case. Then, we turn to the empirical assessment of the Ricardo’s theory: from early reduced form ones to the most recent modern ones.
- Resource-based theory of international tradeWe discuss the trade theories based on difference across countries in the resource endowments. We start from basic 2x2 Heckscher-Olin theory and then move to its testable implications in the form of Vanek’s equations. Then, we turn to the debate in the empirical relevance of the resource-abundance theory of trade: from early contribution by Leontief through the systematic codification of theory failures by Trefler to the most modern version of the theory by Davis and Weinstein
- Role of firms in the global economyWe cover the basic material related to the Dixit-Stiglitz-Krugman model of bilateral international trade. We study the implications of the fundamental features of this model, namely that it puts forward love for variety on the demand side and increasing returns to scale on the supply side as the key factors of bilateral international trade. After that, we deal with the next generation of love-for-variety models, which highlight another important dimension of firm exporting behavior – heterogeneity of firms in productivity. We then turn to discussing recent empirical assessment of these models.
- Gravity equation and pre-dicting trade flowsGravity is ubiquitous in the global economy. We first study the basic logic of gravity as it stems from Newtonian mechanics. Then, we learn how to apply the idea of gravity to empirical studies of international trade flows, migration processes, transportation issues, etc. Next, we follow the evolution of methods of estimating the gravity equation, from OLS through reduced form estimation to structural models. Finally, we discuss the modern developments in gravity estimation.
- Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2015). International Economics: Theory and Policy, Global Edition (Vol. Tenth edition, global edition). Boston: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=nlebk&AN=1419045
- Stern, R. (2017). Balance of Payments : Theory and Economic Policy (Vol. First edition). London: Routledge. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=nlebk&AN=1565159
- Takashi Negishi. (2014). Developments of International Trade Theory. Springer. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.spr.advjbe.978.4.431.54433.3