Empirical International Economics

2019/2020

Academic Year

ENG

Instruction in English

3

ECTS credits

Author

Ushchev, Philip

Delivered at:

Department of Economics

Course type:

Elective course

When:

3 year, 3 module

Instructor

Gomtsyan, David

Course Syllabus

Abstract

A discussion of the key concepts of the discipline, which are also essential for modern economics as a whole (comparative advantage, love for variety, gravity, gains from trade), will be provided. It is also expected that the students will learn how to apply these concepts to better under-stand the problems international economists study: the structure and volume of trade flows, gains from trade, trade policy issues. Finally, the course will briefly explain how the basic models of international economics are developed and used to study the relevant economic questions.

Learning Objectives

• The main purpose of the course is that students get the first idea of what modern international economics is.

Expected Learning Outcomes

• 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.

Course Contents

• Introduction. Stylized facts about international trade
  We 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 advantage
  We 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 trade
  We 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 economy
  We 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 flows
  Gravity 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.

Assessment Elements

• Coursework
  Individual performance at the seminars in form of the presentations of papers
• Written exam
  You must connect Zoom to the writing exam 15 minutes before the start. Student's computer must meet the requirements: (https://elearning.hse.ru/data/2020/05/07/1544135594/Технические%20требования%20к%20ПК%20студента.pdf ) To participate in the exam, the student must: go to the proctoring platform in advance, conduct a system test, turn on the camera and microphone, and verify identity. During the exam, students are prohibited from: communicating (on social networks, with people in the room), writing off. During the exam, students are allowed to: use A4 sheets. A short-term communication disruption during the exam is considered interruption of communication up to 10 minutes. A long-term communication disorder during an exam is considered to be a communication interruption of 10 minutes or more. In case of a long-term communication disruption, the student cannot continue to participate in the exam. The transfer procedure is similar to the surrender procedure.

Interim Assessment

• Interim assessment (3 module)
  0.5 * Coursework + 0.5 * Written exam

Bibliography

Recommended Core Bibliography

• 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

Recommended Additional Bibliography

• 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