INTERAMERICAN UNIVERSITY OF PUERTO RICO METROPOLITAN CAMPUS FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES SCHOOL OF MANAGEMENT DOCTORAL PROGRAM I. TITLE INTERNATIONAL TRADE COURSE INBU 8210 CREDITS 3 PREREQUISITES MICROECONOMIC THEORY: BADM 7223 II. COURSE DESCRIPTION Classical and modern theories of international business in a static and dynamic framework. The implications of business policies derived from the different theories will be analyzed. Aspects such as the importance of international business for developing countries and the development of competitive strategies will be studied. III. OBJECTIVES 1. End Objectives Today we are living in a global society. Virtually all nations are linked to one another by trade flows and financial networks that circle the globe. 1. Evaluate the theory of international trade since David Ricardo and 2. Evaluate the effects of various international economic policies on domestic and world welfare. 2. TERMINAL AND CAPACITATING OBJECTIVES 1.1 To analyze the foundations of international trade and the effects of various international economic policies on domestic and world welfare. Page 1
1.2 To compare the different theories of International Trade from Ricardo to present 2.1 To examine sources of comparative advantage, gains and losses from trade, and the impact of trade on economic growth, 2.2 To predict effects of trade policy interventions such as tariffs, quotas, voluntary export restraints, and export subsidies. IV. CONTENT (TOPICS) A. OVERVIEW: MAJOR ISSUES 1. INTRODUCTION AND GAINS FROM TRADE B.THE THEORY OF COMPARATIVE ADVANTAGE 1. THE RICARDIAN MODEL C. THE HECKSCHER-OHLIN MODEL 1. THE LEONTIEF PARADOX D. SCALE ECONOMIES, IMPERFECT COMPETITION, INTERNATIONAL FACTOR MOVEMENTS 1. ECONOMIC OF SCALE AND INTERNATIONAL TRADE 2. ECONOMIC OF SCALE AND MARKET STRUCTURE 3. THE THEORY OF IMPERFECT COMPETITION a. Monopoly b. Monopolistic Competition 4. MONOPOLISTIC COMPETITION AND TRADE E. INTERNATIONAL TRADE POLICY 1. INSTRUMENTS OF TRADE POLICY a. Tariff and Non-Tariff Barriers b. Trade Policy in Developing Countries c. Strategic Trade Policies in Advance Countries Page 2
F. ECONOMIC GROWTH AND TRADE V. ACTIVITIES A. Presentation in Power Point of Results of Paper Assigned VI. EVALUATION PROCESS Students taking the course for credit are required to A Take one mid-term and one final exam (20% and 30%) B actively participate in the presentation and discussion of the course material, which will necessitate reading the material in advance; C. problems Set (20%) D. complete a paper on a topic related to the course material. Grading will be 20% on (A) 20% on (B) and (C) together, and 30% on (D). The topic of the paper must broadly be related to this course, and is chosen before mid-term exam in consultation with the instructor. E.This primary means of communication outside the classroom will be by email list. Therefore, one requirement will be to obtain an email account, in case you don't have one yet. All general announcements will be made via email. The course grade will be based on these weights: Mid-term exam 20% Term Paper.. 30% Problem sets. 20% Final Exam (comprehensive) 30% VII. MAIN TEXT Page 3
Paul Krugman and Maurice Obstfeld, International Economics. Theory and Policy, 7th ed., Addison-Wesley: 2005 A. OTHER RECOMENDED TEXTS FOR REFERENCE Appleyard, D. R. and A. J. Field, Jr., International Economics, 5th ed., N.Y.: Irwin McGraw-Hill, 2006. Thomas Pugel, International Economics, McGraw-Hill, 13 th Edition, 2006 Richard Caves, Jeffrey Frankel, and Ronald Jones, World Trade and Payments An Introduction, 9th ed., Harper Collins: 2002 Robert C. Feenstra, Advanced International Trade: Theory and Evidence, Princeton University Press, 2003 J. R. Markusen,, Multinational Firms and the Theory of International Trade (Paperback), MIT 2004 Salvatore, Dominick, International Economics, 8th edition, Wiley, 2004. VIII. DETAILED TOPICS AND READINGS Readings A. OVERVIEW: MAJOR ISSUES 1. INTRODUCTION AND GAINS FROM TRADE * The power of Emerging World, The Economist, September 16 22, 2006 Markusen, Melvin, Kaempfer, and Maskus, International Trade: Theory and Evidence, chapters 2-4, 5 *Paul Krugman and Maurice Obstfeld, International Economics. Theory and Page 4
Policy, chapters 1. *Appleyard, D. R. and A. J. Field, Jr., International Economics, chapter 1 and 2 Caves, Frankel and Jones World Trade and Payments An Introduction Ch. 2-3 Angel L. Ruiz Class Notes The pure Theory of International Trade The Importance of International Trade International Trade: An Overview Breve Trasfondo Histórico: mercantilistas, Teoría de ventaja Absoluta y Teoría de Ventaja Comparativa B.THE THEORY OF COMPARATIVE ADVANTAGE Readings 1. THE RICARDIAN MODEL Paul Krugman and Maurice Obstfeld, International Economics. Theory and Policy, chapter 2 Bhagwati, Jagdish and Srinivasan T. N., Lectures on International Trade Foundations of International Economic Analysis, chapters 2-4 R. Dornbusch, S.Fischer, P.Samuelson (1977), "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods", American Economic Review 65: 297-308 Appleyard, D. R. and A. J. Field, Jr., International Economics,, chapters 3 and 4 Thomas Pugel, International Economics, chapters 2 and 3 C. THE HECKSCHER-OHLIN MODEL Page 5
Readings Paul Krugman and Maurice Obstfeld, International Economics. Theory and Policy, chapter 4 Appleyard, D. R. and A. J. Field, Jr., International Economics, chapter 8 Bhagwati, Jagdish and Srinivasan T. N., Lectures on International Trade, chapters 5-7 Caves, Frankel and Jones World Trade and Payments An Introduction, chapters 7-8 Jones, R., and P. Kenen (eds.), 1984, Handbook of International Economics, Vol.1, chapters 1, 3, and 10 Grossman, G., and K. Rogoff (eds.), 1995, Handbook of International Economics, Vol.3, chapter 26 Robert C. Feenstra, Advanced International Trade: Theory and Evidence, chapters 1-3 Ruiz, Angel L., "Factor Proportions and The Pattern of Foreign Trade - The Case of Puerto Rico", Application of Input-Output Techniques to Growth and Trade. Proccedings of 20th Anniversary International Conference, Vol. II. Input-Output Research Association, Shillong, India. D. SCALE ECONOMIES, IMPERFECT COMPETITION, INTERNATIONAL FACTOR MOVEMENTS Readings Paul Krugman and Maurice Obstfeld, International Economics. Theory and Policy, chapters 6-7 Appleyard, D. R. and A. J. Field, Jr., International Economics, chapters 10 and 11 Page 6
Grossman, G. (editor), Imperfect Competition and International Trade, part III Krugman, P., "Increasing Returns, Monopolistic Competition and International Trade", Journal of International Economics (JIE)1979. Krugman, P. "Scale Economies, Product Differentiation and the Pattern of Trade", American Economic Review (AER) 1980. Ethier, W., "National and International Returns to Scale in the Modern Theory of International Trade", AER, 1982. Helpman, E., "International Trade in the Presence of Product Differentiation, Economies of Scale, and Monopolistic Competition: A Chamberlin- Heckscher-Ohlin Approach", JIE, 1981. Angel L. Ruiz, Economías de Escala, Competencia Imperfecta y Comercio Internacional: El Modelo de Krugman (handout) E. INTERNATIONAL TRADE POLICY 1. The Instruments of Trade Policy Readings a. Tariff and Non-Tariff Barriers b. Trade Policy in Developing Countries c. Strategic Trade Policies in Advance Countries Krugman and Obsfeld, Part II, chapters 8-11 Caves, Frankel and Jones World Trade and Payments An Introduction, chapters 11-15 Steven M. Suranovic, Evaluating the Controversy Between Free Trade and protectionism (handout). Angel L. Ruiz, Notas de Clase: Restricciones al Comercio Internacional Page 7
F. ECONOMIC GROWTH AND TRADE Readings Robert C. Feenstra, Advanced International Trade: Theory and Evidence, Princeton University Press, 2003, chapter 10. Frankel, Jeffrey and David Romer, Does Trade cause Growth? American Economic Review, vol. 89 June, 1999. Grossman, G., and E. Helpman, Innovation and Growth in the Global Economy, MIT Press, 1991, chapters 3, 8-12 Rivera Batiz L. and P. Romer, Endogenous Technological Change and Economic Integration, Quarterly Journal of Economics, 1991 Grossman, G., and E. Helpman, "Comparative Advantage and Long-run Growth", AER 1990. Rivera-Batiz, L, and P. Romer, "International Trade with Endogenous Technological Growth", EER 1991. S. Edwards (1993), "Openness, Trade Liberalization, and Growth in Developing Countries", Journal of Economic Literature 31: 1358-1393 Brown, Wilson and Jan Hogendorn: International Economics: Theory and Context, Reading, Mass.: Addison-Wesley, 1994: pages 70-82: "Why Trade Arises Among Similar Countries". David Greenaway: "New Trade Theories and Developing Countries," in V.N. Paul Krugman: "Increasing Returns and the Theory of International Trade," Chapter 5 in Rethinking International Trade, Cambridge, Mass.: MIT Press, 1990 Page 8
IX. BIBLIOGRAPHY Appleyard, D. R. and A. J. Field, Jr., International Economics, 5th ed., N.Y.: Irwin McGraw-Hill, 2006. Thomas Pugel, International Economics, McGraw-Hill, 13 th Edition, 2006 Richard Caves, Jeffrey Frankel, and Ronald Jones, World Trade and Payments An Introduction, 9th ed., Harper Collins: 2002 Robert C. Feenstra, Advanced International Trade: Theory and Evidence, Princeton University Press, 2003 J. R. Markusen,, Multinational Firms and the Theory of International Trade (Paperback), MIT 2004 Salvatore, Dominick, International Economics, 8th edition, Wiley, 2004. Grossman, G., and E. Helpman, 1991, Innovation and Growth in the Global Economy, MIT Press; 1991, Jones, R., and P. Kenen (eds.), 1984, Handbook of International Economics, Vol.1, North- Holland, 1984. Helpman, E., and P. Krugman, 1985, Market Structure and Foreign Trade, MIT Press 1985 Grossman, G. (editor), Imperfect Competition and International Trade, MIT Press P. Krugman, "Increasing Returns, Imperfect Competition, and the Positive Theory of International Trade", Ch. 24. Caves, R., Multinational Enterprise and Economic Analysis, 2nd ed., Cambridge University Press, 1996 Bhagwati, Jagdish, N., (ed.), International Trade: Selected Readings, MIT Press Page 9
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