ECON 4413-003 International Trade

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ECON 4413-003 International Trade
Economics 4413-003 International Trade
Fall, 2009, MW 5:00-6:15
Guggenheim 225
Professor Keith Maskus
Office: Economics 107; 303-492-7588
Hours: M 3:00-4:30; W 9:00-10:00
[email protected]
Course Outline
Welcome to my course, which is an advanced undergraduate treatment of international trade
theory and policy. In this course we will study aspects of international trade at a fairly abstract and
rigorous level. Although the analysis will be largely graphical in nature, the course materials and
lectures will employ some mathematics. Among the issues that will be addressed are: (1) the
fundamental determinants of the patterns of trade and the gains from trade; (2) the implications of
imperfect competition for trade patterns and welfare; (3) how firms of different sizes and
productivities engage in trade and investment; (4) justifications for policies that restrict trade; (5) the
effects of trade and investment barriers; (6) the rationale for regional free-trade agreements and
multilateral trade rules; and (7) the role of international capital and labor movements. We will also
read about real-world areas of international trade, including trade institutions, trade liberalization
and poverty, and interactions between trade policy and environmental regulation.
Thus, there are three goals in the course. First, we will develop a solid grounding in the
analytical work of modern trade theory. Second, we will master some tools for use in practical trade
analysis. Third, we will understand better the circumstances within which international trade policy
is made. This is an ambitious agenda and will require sustained effort.
The required text is International Trade: Theory and Evidence, which is currently being
drafted by my colleague, James Markusen, and myself (the text will be listed as MM below).
Chapters 2- 12 of the text are available in bound form at the bookstore. Further, you can download
each chapter (pdf format) from the teaching page of my website, which is
http://spot.colorado.edu/~maskus/teaching.html. Go to the 4413 section. My webpage can easily
be found through the Economics department website, which is http://www.colorado.edu/Economics
(NOTE THE CAPITAL E). Click on people, then faculty and follow my name. You can also
follow the department site link directly to courses, then click 4413. Be sure your machine can read
PDF files and read (or convert) Word files.
It will be important to supplement the text with some recent and topical material as detailed
below. These materials will also be available on the website or linked from there. Please consult
the course webpage frequently for new materials. Finally, you will find it interesting to read about
current international trade issues in The Wall Street Journal, The New York Times, The Financial
Times, and The Economist, but this is not required.
We will attempt to complete most of the volume, as detailed below, though this will be a
challenge. The textbook takes an abstract, general-equilibrium approach to international trade
theory and can be rather rough going in spots. Thus, it is important that you understand the course
prerequisite, which is successful completion of intermediate microeconomic theory. I will consider
requests for exemptions from this prerequisite in individual consultations, but please be advised that
micro theory is the foundation for this course.
There are a number of interesting books on globalization and trade that might interest you.
Among the more popular are Thomas Friedman, The World is Flat (Farrar, Strauss and Giroux);
Joseph Stiglitz and Andrew Charlton, Fair Trade for All (Oxford University Press); Dani Rodrik,
Has Globalization Gone Too Far? (Institute for International Economics); David Dollar and Paul
Collier, Globalization, Growth and Poverty: Building an Inclusive World Economy (World Bank
Press). A spirited defense of global trade is Jagdish Bhagwati, In Defense of Globalization (Oxford
University Press) .
Lecture Content
Lectures will be held twice a week, except when in-class examinations are scheduled.
While real-world examples will be used often to motivate the analysis, portions of a few class
periods will be set aside for discussion of current international trade topics, such as trade and
climate change. Before these discussions I will make available relevant policy papers that I have
written on each subject.
There will be two mid-term examinations, each worth 30% of your grade, and one final
examination worth 40%. I will also provide you with problem sets in preparation for exams but
their completion is up to you and they will not be graded. Answers will be available on the course
website, as will examples of examinations from earlier classes so you can see the general format I
use. Examinations will cover text materials and trade topics, as noted below.
In this section we study the essential microeconomic tools needed to study modern international
trade theory and apply them to understand why countries gain from engaging in trade.
1. Introduction
MM, Chapter 1
August 24
2. Supply and Production Possibilities
MM, Chapter 2
August 26 – 31
3. Preferences, Demand, and Welfare
MM, Chapter 3
August 31
4. General Equilibrium
MM, Chapter 4
September 2
September 7
5. Gains from Trade
MM, Chapter 5
Reading: Empirical Evidence on GFT: Japan
September 9
We turn next to our essential theories and evidence about what actually determines the patterns and
volumes of international trade. This will permit us also to say much more about the gains from
trade and how those gains (and losses) are distributed among people and firms.
1. Basic Differences in Technology and Productivity: Ricardian Model
MM, Chapters 6 and 7
Reading: Evidence on Productivity and Trade
2. Differences in Factor Endowments: Heckscher-Ohlin Model
MM, Chapter 8
Reading: Testing the HO Model
September 23 - September 28
3. Short-Run Differences in Factor Endowments: Specific-Factors Model
MM, Chapter 9
Policy Discussion A: Trade Liberalization and Poverty
Maskus, "How Trade Liberalization Affects Poverty: Concepts"
Dollar and Collier, Globalization, Growth, and Poverty, Chapter 1
Covers Chapters 1 - 9 and Policy Discussion A.
4. Distortions and Externalities as Determinants of Trade
MM, Chapter 10
September 14 - 21
September 30
October 5
October 7
October 12
5. Increasing Returns, Oligopoly and Trade
MM, Chapter 11 (skip Section 4)
October 14 - 19
6. Increasing Returns, Monopolistic Competition and Trade
MM, Chapter 12 (skip Section 3)
October 19 - 21
7. Economic Geography and Heterogeneous Firm Behavior
MM, Chapter 13
October 26 – November 2
Reading: Evidence from the Gravity Model and Firm-level Studies
Skip Chapter 14
Part 3: International Trade in Capital and Labor
In this section we will study the role of movements of production factors across borders and the
effects they have on welfare and income distribution. Of particular interest will be to understand the
nature of the multinational enterprise.
1. Trade in Factors of Production: General Concepts
MM, Chapter 15
November 4
Covers Chapters 10-13 and 15
November 9
Skip Chapter 16
2. Multinational Firms and Foreign Direct Investment
MM, Chapter 17
Reading: Maskus, "Theories of Foreign Direct Investment" (handout)
November 4, 11
3. International Labor Migration
MM, Chapter 18
November 16
1. Tariffs
MM, Chapter 19
November 16 - 18
November 23 - 27
2. Quotas and Non-Tariff Barriers
MM, Chapter 20
Policy Discussion B: Trade and the Environment
Reading: Maskus, "Trade and the Environment: What are the Issues and How
Do Trade Economists Think About Them?"
November 30
December 2
Skip Chapter 21
3. Preferential Trade Areas
MM, Chapter 22
December 7
Skip Chapter 23
4. Trade Rules and the WTO
MM, Chapter 24
7:30 - 10:00 PM
Covers Chapters 17 – 20; 22, 24 and Policy Discussion B
December 9
Wednesday, Dec 16
I am willing to accommodate the special needs of students with disabilities and particular needs for
religious observations, but please contact me immediately if you have such concerns. Finally, you
should be aware of the University’s honor code, policy for student classroom behavior, and policy
regarding discrimination and harassment. The campus policies for these and other issues may be
found at http://www.colorado.edu/Economics/courses/fall09-course-index.html.
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