ECONOMICS 6421 (FALL 2009) ADVANCED INTERNATIONAL TRADE: THEORY AND POLICY

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1 ECONOMICS 6421 (FALL 2009) ADVANCED INTERNATIONAL TRADE: THEORY AND POLICY PROFESSOR XENIA MATSCHKE Brief Description Economics 6421 provides an overview of international trade theory for Ph.D. students in economics. Grades are based on a midterm exam (40%), a final exam (40%), and an in-class presentation of a published research paper from a given list of papers (20%). Textbook We are mainly going to discuss scholarly articles in class, so there is no required textbook. However, the following books are recommended, and parts of them are required reading material. BHV: Bowen, H. P., A. Hollander and J.-M. Viaene: Applied International Trade Analysis, University of Michigan DN: Dixit, A. K. and V. Norman (1980): Theory of International Trade, Cambridge University HK: Helpman, E. and P. Krugman (1985): Market Structure and Foreign Trade, MIT Feenstra: Feenstra, R. C. (2004): Advanced International Trade, Princeton University HIE vol. 1: Jones, R. W. and P. B. Kenen, eds. (1984): Handbook of International Economics, vol. 1, North-Holland. HIE vol. 3: Grossman, G. M. and K. Rogoff, eds. (1995): Handbook of International Economics, vol. 3, North-Holland. HIT: Choi, E. K. and J. Harrigan, eds. (2003): Handbook of International Trade, Blackwell. A tentative course outline and reading list is given below. It is more than likely that we won t be able to talk about all the listed papers; on the other hand, it is also likely that I will add some additional papers to the reading list during the course of the semester. Course Outline and Reading List 1. Introduction Discussion of how trade theory relates to class material seen in Advanced Microeconomics. Contact information: # 340, Monteith. Phone: , Xenia.Matschke@uconn.edu, Web: Office Hours: MW 2-3 or by appointment.

2 2. Ricardian Theory of Comparative Advantage BHV book, ch. II.3. Dornbusch, Rüdiger et al. (1977): Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods, American Economic Review, vol. 67, pp Heckscher-Ohlin Factor Proportions Theory DN book, ch HK book, ch. 1. Feenstra book, ch Deardorff, Alan V. (1984): Testing Trade Theories and Predicting Trade Flows, HIE, vol. 1, pp Ethier, Wilfred J. (1984): Higher Dimensional Issues in Trade Theory, HIE, vol. 1, pp Leamer, Edward E. and James Levinsohn (1995): International Trade Theory: The Evidence, HIE, vol. 3, pp Davis, Donald R. and David E. Weinstein (2003): The Factor Content of Trade, HIT, pp Leontief, Vassily (1953): Domestic Production and Foreign Trade: The American Capital Position Re-examined, Proceedings of the American Philosophical Society, vol. 97, pp Trefler, Daniel (1993): International Factor Price Differences: Leontief was Right!, Journal of Political Economy, vol. 101, pp Trefler, Daniel (1995): The Case of the Missing Trade and Other Mysteries, American Economic Review, vol. 85, pp Gabaix, Xavier (1997): The Factor Content of Trade: A Rejection of the Heckscher- Ohlin-Leontief Hypothesis, Working Paper, Harvard University. Estevadeordal, Antoni and Alan M. Taylor (2002): A Century of Missing Trade?, American Economic Review, vol. 92, pp Davis, Donald R. and David E. Weinstein (2001): An Account of Global Factor Trade, American Economic Review, vol. 91, pp Monopolistic Competition and Intraindustry Trade Dixit, Avinash and Joseph Stiglitz (1977): Monopolistic Competition and Optimum Product Diversity, American Economic Review, vol. 67, pp HK book, Ch Krugman, Paul (1995): Increasing Returns, Imperfect Competition and the Positive Theory of International Trade, HIE, vol. 3, pp Krugman, Paul (1979): Increasing Returns, Monopolistic Competition, and International Trade, Journal of International Economics, vol. 9, pp Krugman, Paul (1980): Scale Economies, Product Differentiation, and the Pattern of Trade, American Economic Review, vol. 70, pp Krugman, Paul (1981): Intraindustry Specialization and the Gains from Trade, Journal of Political Economy, vol. 89, pp

3 5. Who Exports? Theory and Evidence Melitz, Marc (2003): The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity, Econometrica, vol. 71, pp Tybout, James R. (2003): Plant- and Firm-Level Evidence on New Trade Theories, HIT, pp Roberts, Mark and James Tybout (1997): The Decision to Export in Columbia: An Empirical Model of Entry with Sunk Costs, American Economic Review, vol. 87, pp Inequality and Trade Feenstra book, ch. 4. Katz, Lawrence F. and Kevin M. Murphy (1992): Changes in Relative Wages, : Supply and Demand Factors, Quarterly Journal of Economics, vol. 107, pp Davis, Donald R. (1998): Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade, American Economic Review, vol. 88, pp Lawrence, Robert Z. et al. (1993): International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hickup?, Brookings Papers on Economic Activity: Microeconomics, vol , pp Haskel, Jonathan and Matthew J. Slaughter (2003): Have Falling Tariffs and Transportation Costs Raised U.S. Wage Inequality, Review of International Economics, vol. 11, pp Feenstra, Robert C. and Gordon H. Hanson (2003): Global Production Sharing and Rising Inequality: A Survey of Trade and Wages, HIT, pp Attanasio, Orazio, Goldberg, Pinelopi and Nina Pavcnik (2004): Trade Reforms and Wage Inequality in Colombia, Journal of Development Economics, 74, pp Trade and Environment Grossman, Gene M. and Alan B. Krueger (1991): Environmental Impacts of a North American Free Trade Agreement, NBER working paper No Copeland, Brian R. and M. Scott Taylor (2003): Trade and the Environment: Theory and Evidence, Princeton University Antweiler, Werner et al. (2001): Is Free Trade Good for the Environment?, American Economic Review, vol. 91, pp Levinson, Arik and M. Scott Taylor (2008): Unmasking the Pollution Haven Effect, International Economic Review, vol. 49, pp Taylor, M. Scott (2007): Buffalo Hunt: International Trade and the Virtual Extinction of the North American Bison, NBER Working Paper No

4 8. Strategic Trade Policy Brander, James A. (1995): Strategic Trade Policy, HIE, vol. 3, pp Brander, James A. and Barbara J. Spencer (1985): Export Subsidies and International Market Share Rivalry, Journal of International Economics, vol. 18, pp Eaton, Jonathan and Gene M. Grossman (1986): Optimal Trade and Industrial Policy under Oligopoly, Quarterly Journal of Economics, vol. 101, pp Matschke, Xenia (2003): Tariff and Quota Equivalence in the Presence of Asymmetric Information, Journal of International Economics, vol. 61, pp Matschke, Xenia and Anja Schöttner (2007): Antidumping Duties under Asymmetric Cost Information, Department of Economics, University of Connecticut, Working Paper No Berry, Stephen et al. (1999): Voluntary Export Restraints on Automobiles: Evaluating a Trade Policy, American Economic Review, vol. 89, pp Political Economy of Trade Protection Baldwin, Robert E. (1984): Trade Policies in Developed Countries, HIE, vol. 1, pp Rodrik, Dani (1995): Political Economy of Trade Policy, HIE, vol. 3, pp Feenstra book, ch. 9. Scheve, Kenneth F. and Matthew J. Slaughter (2001): What Determines Individual Trade Policy Preferences?, Journal of International Economics, vol. 54, pp Helpman, Elhanan (1995): Politics and Trade Policy, NBER Working Paper No Gawande, Kishore and Pravin Krishna (2003): The Political Economy of Trade Policy: Empirical Approaches, HIT, pp Grossman, Gene M. and Elhanan Helpman (1994): Protection for Sale, American Economic Review, vol. 84, pp Goldberg, Pinelopi K. and Giovanni Maggi (1999): Protection for Sale: An Empirical Investigation, American Economic Review, vol. 89, pp Gawande, Kishore and Usree Bandyopadhyay (2000): Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection, Review of Economics and Statistics, vol. 82, pp Matschke, Xenia (2008): Costly Revenue-Raising and the Case for Favoring Import- Competing Industries, Journal of International Economics, vol. 74, pp Mayer, Wolfgang (1984): Endogenous Tariff Formation, American Economic Review, vol. 74, pp Dutt, Pushan and Devashish Mitra (2002): Endogenous Trade Policy through Majority Voting: An Empirical Investigation, Journal of International Economics, vol. 58, pp

5 10. Theory of Trade Agreements Johnson, H. G. (1962): The Economic Theory of Customs Union, ch. 3, in: Money, trade, and economic growth, pp Feenstra book, ch. 6. Irwin, Douglas A. (1995): The GATT in Historical Perspective, American Economic Review (Papers and Proceedings), vol. 85, pp Staiger, Robert W. (1995): International Rules and Institutions for Cooperative Trade Policy, HIE, vol. 3, pp Bagwell, Kyle and Robert W. Staiger (2003): The Economics of the World Trading System, MIT Bagwell, Kyle and Robert W. Staiger (1999): An Economic Theory of the GATT, American Economic Review, vol. 89, pp Ossa, Ralph (2009): A New Trade Theory of GATT/WTO Negotiations, Working Paper, University of Chicago Booth School of Business. Trefler, Daniel (2004): The Long and Short of the Canada-US Free Trade Agreement, American Economic Review, vol. 94, pp MW p.m p.m. in 311 Monteith. Class Time Class Webpage This syllabus and other class handouts are available at