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Regular version of the site

International Trade

2019/2020
Academic Year
ENG
Instruction in English
5
ECTS credits
Course type:
Elective course
When:
2 year, 2 module

Instructor


Kichko, Sergey

Course Syllabus

Abstract

First, we discuss stylized facts, importance of international trade, and forces that drive international trade. Second, we study the classical theory of international trade based on technological differences or comparative advantages, including Ricardo and Heckscher-Ohlin models. The theory explains inter-industry trade. Third, starting from the growing tendency of intra-industry trade, we discuss why inter-industry trade is profitable for firms (increasing returns to scale at the firm level) and enjoyable for consumers (love for variety). We focus on the baseline monopolistic competition model and its applications in international trade in detail. The next step is to discuss modern interpretations of classical trade models and consequences of trade under combining classical and new trade theory. Therefore, we are going to discuss the “new new” trade theory where firms are heterogeneous. The main focus of this part of the course is on firm-level changes under trade liberalization. To conclude, new effects will be discovered in the new trade models by allowing variable markups.
Learning Objectives

Learning Objectives

  • The main purpose of the International trade course for students is to study the evolution of trade ideas.
Expected Learning Outcomes

Expected Learning Outcomes

  • Systemize theoretical knowledge received at lectures
  • Extending theoretical knowledge
  • Learn how to use legal, regulatory, referential information and professional literature
  • Development of cognitive and soft skills: creativity and self-sufficiency
  • Enhancing critical thinking and personal development skills
  • Development of research skills
  • Obtaining skills of efficient independent professional activities
Course Contents

Course Contents

  • Introduction to International trade
    The object of International trade: why countries trade with each other, what the effects of international trade are. The history of trade: empirical evidence. The role of space: spatial inequality and transportation costs. Productivity gains and falling transport costs under Industrial Revolution.
  • Classical trade theories: technology, comparative advantages, and factor endowments. Inter-industry trade.
    Trade between dissimilar countries and the theory of comparative advantage. Ricardian model and technological differences across countries: absolute and comparative advantage. Specialization of countries. Changes in prices. Stolper-Samuelson theorem. Changes in endowments. Rybczynski theorem. The Heckscher-Ohlin Model: differences in factor endowment. Factor price equalization. The welfare effects: GDP and gains form trade.
  • Monopolistic competition model
    Starett Theorem. Differentiated product. The Dixit-Stiglitz model: assumptions, preferences and demand function, market power and price index, technology, market equilibrium, the mass of firms, monopolistic competition as a limiting case of oligopoly.
  • New trade theory: intra-industry trade
    The role of increasing returns to scale at the firm level and love for variety. The Dixit-Stiglitz-Krugman model: iceberg-type transportation costs, demands at the domestic and foreign markets, price indices and market sizes, trade patterns, gains from trade. Trade and space: market crowding effect and market access effects, firms’ location decisions, Home Market Effect, partial specialization of countries.
  • Firms in international trade
    Stylized facts on firms’ heterogeneity. Monopolistic competition model with heterogeneous firms: endogenous distribution of firms within industry, relative performance, firms entry and exit, equilibrium. Implications to trade: fixed export costs, sorting to exporters and non-exporters (how many firms export; do more or less productive firms export?), reallocation of resources within a sector under opening trade and trade liberalization, impact of trade liberalization and decreasing export cost on a trade pattern.
  • Variable markups and trade
    The role of demand structure in international trade. Variable markups. Pro-competitive effect. Gains from trade: product diversity and gains from pro-competitive effects. Price policy: dumping effect. Patterns of trade and trade liberalization: export pricing and export values. Distortions from trade. Impact of trade on welfare and efficiency. Multi-sector model and intersectoral distortions.
Assessment Elements

Assessment Elements

  • non-blocking Quizes
  • non-blocking Presentation
  • non-blocking Exam
Interim Assessment

Interim Assessment

  • Interim assessment (2 module)
    0.4 * Exam + 0.1 * Presentation + 0.5 * Quizes
Bibliography

Bibliography

Recommended Core Bibliography

  • Fujita, M., & Thisse, J.-F. (2002). Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It? CEPR Discussion Papers. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.cpr.ceprdp.3135

Recommended Additional Bibliography

  • Feenstra, R. C. (2004). Advanced International Trade : Theory and Evidence. Princeton, N.J.: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=295542
  • Fujita, M., Krugman, P. R., & Venables, A. (1999). The Spatial Economy : Cities, Regions, and International Trade. Cambridge, Mass: The MIT Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=9243
  • Helpman, E. (2011). Understanding Global Trade. Harvard University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.hup.pbooks.9780674060784
  • Pierre-Philippe Combes, Thierry Mayer, & Jacques-François Thisse. (2008). Economic Geography: The Integration of Regions and Nations. Post-Print. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.hal.journl.hal.00311000