International Economics 518 Syllabus Fall 2013 Prof. Vlad Manole Office: Hill Hall 808 Email: vlad.manole@rutgers.edu Office Hours: Wednesdays 2:30 pm or by appointment. To set up an appointment, the best way to contact me is by e-mail. Course description This course will analyze the causes and consequences of international trade. The first part of the course covers economic models used for the analysis of international trade policy issues. The second part of the course examines policies that governments adopt towards international trade and discusses more specific trade topics that have attracted special attention in recent years. The course will be a mix of lecture materials and journal articles. You are expected to read the required articles ahead of each class. Each of you will present an article from the recommended list during class. You are required to write a paper, due at the end of the semester. The topic of the paper needs to be decided in consultation with me. You have two options for the paper: 1) a 10-15 page literature review (minimum 7 journal citations), or 2) a paper that presents a new problem and derives theoretical and/or empirical results (at least 10 pages). You will present your paper to the class in one of the final two weeks of the term. The prerequisites for the course are Introduction to Microeconomics and Calculus. The course will involve a significant amount of data analysis using spreadsheets or other data management software like Stata (I will present the basics for using Stata in the first course). Students are expected to keep current with developments in the global economy by reading New York Times or The Economist. Current issues in the global economy will be a regular topic of class discussion. I will hand out problems from time to time. We will discuss some of these in class. We will use Blackboard for this course. The Blackboard account for this course will contain this syllabus (and any updates) plus announcements, assignments, and other useful information (e.g., links to some required readings and related websites). The course account will also be used for sending e-mail messages to class participants; I will use this feature extensively to make announcements. You are responsible for accessing the class website and checking it (and your e-mail) regularly. 1
Course Grading - Mid-term exam - 20% - Final exam - 35% - Recommended article presentation - 5% - Write and present a paper - 20% - Homework - 20% TOTAL = 100% Midterm exam: TBA Final Exam: TBA There will be NO make-up exams unless you have a valid documented excuse (such as doctor s note) AND I have been notified BEFORE the exam that you can t take the regularly scheduled exam. There is NO extra credit for any work that is not required from all students. Please do NOT request differential treatment as a way to boost your grades. Course Materials Required text: Feenstra, Robert, Advanced International Trade: Theory and Evidence, Princeton University Press, 2003. Hereafter referred to as RF. Course outline and reading list (Preliminary) Session 1. What Is International Economics About? World Trade Overview Krugman, Paul. "Growing World Trade: Causes and Consequences." Brookings Papers on Economic Activity. 1995, 1, 327-342. Baier, S.L. and J.H. Bergstrand, The Growth of World Trade: Tariffs, Transport Costs and Income Similarity, Journal of International Economics, 2001. Rodrik, Dani. How Far Will International Economic Integration Go?, Journal of Economic Perspectives, 2000, vol. 14(1), 177-186. Krugman, Paul R. What Do Undergrads Need to Know about Trade?. American Economic Review. Vol. 83 (2). p 23-26. May 1993 Session 2. Comparative Advantage: The Ricardian Model; Extensions and Tests of the Classical Model of Trade Chapter 1 - RF 2
Daniel M. Bernhofen and John C. Brown. A Direct Test of the Theory of Comparative Advantage: The Case of Japan, Journal of Political Economy, 2004, Vol. 112, 1, 48-67. Belloc M, Institutions and international trade: A reconsideration of comparative advantage, Journal of Economic Surveys 20 (1): 3-26 Feb. 2006. Jonathan Eaton and Samuel Kortum (2012) Putting Ricardo to Work, Journal of Economic Perspectives Volume 26, Number 2 Spring 2012 Pages 65 90. Sessions 3. Specific Factors and Income Distribution. Resources and Trade: The Heckscher-Ohlin Model Chapter 2 RF Daniel Trefler and Susan Chun Zhu(2010), The structure of factor content predictions, Journal of International Economics 82 (2010) 195 207. Keith E. Maskus and Shuichiro Nishioka (2009) Development-related biases in factor productivities and the HOV model of trade, Canadian Journal Of Economics. May 2009;42(2):519-553. Harald Fadinger(2011) Productivity differences in an interdependent world, Journal of International Economics 84 (2011) 221 232. Shuichiro Nishioka (2012) International differences in production techniques: Implications for the factor content of trade, Journal of International Economics 87 (2012) 98 104. Sessions 4. Trade in Intermediate Inputs and Wages Chapter 4 RF Chusseau, Natha; Dumont, Michel; Hellier, Joel (2008). Explaining rising inequality: Skill-biased technical change and North-South trade, JOURNAL OF ECONOMIC SURVEYS Volume: 22 Issue: 3 Pages: 409-457 Epifani, P ; Gancia, G (2008). The skill bias of world trade, ECONOMIC JOURNAL Volume: 118 Issue: 530 Pages: 927-960. Jonathan Haskel, Robert Z. Lawrence, Edward E. Leamer, and Matthew J. Slaughter, (2012) Globalization and U.S. Wages, Journal of Economic Perspectives Volume 26, Number 2 Spring 2012 Pages 119 140. Amiti, Mary; Konings, Jozef (2007). Trade liberalization, intermediate inputs, and productivity: Evidence from Indonesia, AMERICAN ECONOMIC REVIEW Volume: 97 Issue: 5 Pages: 1611- Session 5. Increasing Returns and the Gravity Equation. Chapter 5 RF Melitz, M., "The impact of trade on intra-industry reallocations and aggregate industry productivity," Econometrica, 2003 Elhan Helpman. The Structure of Foreign Trade, Journal of Economic Perspectives, Vol. 13, No.2 (1999), 121-144. Krugman, Paul. Increasing Returns, Monopolistic Competition and International Trade, Journal of International Economics, 1979, 9(4): 469-479. 3
Helpman, E., M. Melitz and Y. Rubinstein, Estimating Trade Flows: Trading Partners and Trading Volumes, Quarterly Journal of Economics, May 2008, v. 123, iss. 2, pp. 441-87 Session 6. Gains from Trade and Regional Agreements Chapter 6 RF Marc J. Melitz and Daniel Trefler (2012) Gains from Trade when Firms Matter, Journal of Economic Perspectives Volume 26, Number 2 Spring 2012 Pages 91 118. Lileeva, Alla(2008). Trade liberalization and productivity dynamics: evidence from Canada, CANADIAN JOURNAL OF ECONOMICS-REVUE CANADIENNE D ECONOMIQUE Volume: 41 Issue: 2 Pages: 360-390 Published: MAY 2008 Topalova, Petia; Khandelwal, Amit (2011) TRADE LIBERALIZATION AND FIRM PRODUCTIVITY: THE CASE OF INDIA, REVIEW OF ECONOMICS AND STATISTICS Volume: 93 Issue: 3 Pages: 995-AUG 2011 Session 7. October 17 MIDTERM EXAM Session 8. Import Tariffs and Dumping & Import Quotas and Export Subsidies Chapter 7,8 RF Douglas A. Irwin(2010) Trade Restrictiveness and Deadweight Losses from US Tariffs, American Economic Journal: Economic Policy 2 (August 2010): 111 133. Sohini Chowdhury(2012) The Discriminatory Nature of Specific Tariffs, World Bank Econ Rev (2012) 26(1) Feenstra, Robert C. "How Costly is Protectionism?" Journal of Economic Perspectives, Summer 1992, 159-178. Niels, Gunnar. What Is Antidumping Policy Really About?, Journal of Economic Surveys. Vol. 14 (4). p 467-92. September 2000. Session 9. Firm Heterogeneity, Exports, Productivity and Costs of Entry Roberts, M. and J. Tybout, "The decision to export in Colombia: an empirical model of entry with sunk costs," AER, 1997 Bernard, A. and B. Jensen, "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, 1999 Clerides, S., S. Lach and J. Tybout, "Is learning by exporting important? Microdynamic evidence from Colombia, Mexico, and Morocco," Quarterly Journal of Economics, 1998 *Bernard and Jensen, "Exporting and productivity," Oxford Review of Economic Policy, Vol. 20, No. 3, Autumn 2004. *Pavcnik, N., "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, 2002, Vol. 69, No. 1, 245-276 4
Session 10. Trade and Endogenous Growth Chapter 9 RF Singh, Tarlok (2010). Does International Trade Cause Economic Growth? A Survey, WORLD ECONOMY Volume: 33 Issue: 11 Pages: 1517- Published: NOV 2010 Session 11. Multinationals and Organization of the Firm Chapter 10 RF J. Markusen, The Boundaries of Multinational Enterprises and the Theory of International Trade, Journal of Economic Perspectives, Spring 1995. Blonigen, B., A Review of the Empirical Literature on FDI Determinants, NBER # 11299. Helpman E. (2006) Trade, FDI and the Organization of Firms Journal of Economic Literature 44, 589-630. Jeffrey G. Williamson. Globalization, Labor Markets and Policy Backlash in the Past, Journal of Economic Perspectives, Vol. 12, No.4 (1998), 51-72. Javorcik B and M. Spatareanu, To Share or Not To Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment? Journal of Development Economics, vol. 85(1-2), 2008 Keller, W. and S. Yeaple, "Multinational enterprises, international trade and productivity growth: firm-level evidence from the US," NBER Working Paper No. 9504, 2003 Criscuolo, C., J. Haskel, and M. Slaughter, "Global Engagement and the Innovation Activities of Firms," NBER Working Paper No. 11479, 2005 Hanson, G., and R. Feenstra, "Ownership and Control in Outsourcing to China: Estimating the Property Rights Theory of the Firm," QJE 2005 Session 12. Trade Policy in Developing Countries Paul Krugman. Does Third World Growth Hurt First World Prosperity? Harvard Business Review, 1 August 1994, 113-121. Gordon H. Hanson(2012) The Rise of Middle Kingdoms: Emerging Economies in Global Trade, Journal of Economic Perspectives Volume 26, Number 2 Spring 2012 Pages 41 64 L. Alan Winters, Neil McCulloch, and Andrew McKay. Trade Liberalization and Poverty: The evidence so far, Journal of Economic Literature, Vol. XLII (March 2004), 72-115. Greenwald, Bruce and Joseph Stiglitz, Helping Infant Economies Grow: Foundations of Trade Policies for Developing Countries", American Economic Review, Volume 96, Number 2 (May 2006), pp. 141-146. 5
Session 13. Controversies in Trade Policy Dani Rodrik. How Far Will International Economic Integration Go?, Journal of Economic Perspectives, Vol.14, No.1 (2000), 177-186. Robert C. Feenstra. Integration of Trade and Disintegration of Production in the Global Economy, Journal of Economic Perspectives, Vol. 12, No.4 (1998), 31-50. Bhagwati, Jagdish In Defense of Globalization: It Has a Human Face, The 2005 Angelo Costa Lecture (Rome). Bhagwati, Jagdish; Panagariya, Arvind; Srinivasan, T N. The Muddles over Outsourcing, Journal of Economic Perspectives. Vol. 18 (4). p 93-114. Fall 2004. Stiglitz, Joseph. Social Justice and Global Trade, Far Eastern Economic Review; Mar 2006; 169, 2; Samuelson, Paul A. Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization, Journal of Economic Perspectives, 18 (3): 135 146, Summer 2004. Session 14. Final Exam. 6