This is an archived course. A more recent version may be available at ocw.mit.edu.

Syllabus

Course Meeting Times

Lectures: 2 sessions / week, 1.5 hours / session

Recitations: 1 session / week, 1.5 hour / session

Description

This course provides a graduate-level introduction to the field of international trade. Topics include gains from trade, Ricardian models of technological differences, Heckscher-Ohlin models of factor endowment differences, intermediate input trade, wage inequality, imperfect competition, firm heterogeneity, multinational firms, international organization of production, dynamics, trade policy, trade and institutions, sorting in trade and foreign direct investment (FDI), and effects of geography on trade. This course is targeted to second-year PhD students in economics.

Prerequisites

The prerequisites for this course include Intermediate Microeconomic Theory (14.04). Students are expected to have completed first-year PhD courses in Microeconomic and Macroeconomic Theory. I will not restrict enrollment but make sure you have an appropriate background.

Recommended Texts

There are no required textbooks. The reading list refers to the following books, which are very much worth buying, but will be on reserve at the library:

Amazon logo Dixit, Avinash, and Victor Norman. Theory of International Trade: A Dual, General Equilibrium Approach. Cambridge, UK: Cambridge University Press, 1980. ISBN: 9780521234818.

Amazon logo Feenstra, Robert. Advanced International Trade: Theory and Evidence. Princeton, NJ: Princeton University Press, 2003. ISBN: 9780691114101.

Amazon logo Grossman, Gene, and Elhanan Helpman. Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press, 1991. ISBN: 9780262071369.

Amazon logo Grossman, Gene, and Kenneth Rogoff. Handbook of International Economics. Vol. 3. New York, NY: Elsevier, 1995. ISBN: 9780444815477.

Amazon logo Helpman, Elhanan, and Paul R. Krugman. Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy. Cambridge, MA: MIT Press, 1987. ISBN: 9780262580878.

Amazon logo Jones, Ronald, and Peter Kenen. Handbook of International Economics. Vol. 1. New York, NY: Elsevier, 1984. ISBN: 9780444867926.

Grading

There will be four problem sets, one midterm exam, and one final exam. You will have about two weeks to complete each problem set. The exams will be closed book and closed notes. The midterm and final exams will take place during regular lecture hours.

ACTIVITIES PERCENTAGES
Class participation 10%
Problem sets (5% each) 20%
Midterm exam 30%
Final exam 40%

 

Calendar

SES # TOPICS KEY DATES
I. Introduction: Trade facts and gains from trade
1 Trade facts and gains from trade  
II. Technological differences: Ricardian models
2 Technological differences: Ricardian models Problem set 1 out
3 Eaton and Kortum's (2003) Ricardian model  
III. Factor endowment differences: Heckscher-Ohlin
4 The 2x2x2 Heckscher-Ohlin model: Part I  
5 The 2x2x2 Heckscher-Ohlin model: Part II Problem set 1 due
6 The generalized Heckscher-Ohlin model  
IV. Empirical tests of the Heckscher-Ohlin model
7 Empirical tests of the Heckscher-Ohlin model Problem set 2 out
V. Intermediate input trade and wage inequality
8 Intermediate input trade and wage inequality  
VI. Imperfect competition: Theory
9 Trade, external scale economics and oligopoly  
10 Trade and monopolistic competition  
VII. Imperfect competition: Empirics
11 Trade and monopolistic competition: Empirics Problem set 2 due
VIII. Firm heterogeneity
12 Intraindustry heterogeneity in trade models: Part I Midterm exam 2 days after Ses #12
13 Intraindustry heterogeneity in trade models: Part II  
IX. Multinational firms
14 Technological theories of foreign direct investment (FDI) Problem set 3 out
X. International organization of production
15 The transaction-cost approach in international trade  
16 The property-rights approach in international trade  
XI. Dynamics of international trade
17 Dynamic trade theory I: Trade and neoclassical growth Problem set 3 due
18 Dynamic trade theory II: Trade, technology, and growth Problem set 4 out
19 Dynamic trade theory III: Innovation, technology transfer, and product cycles  
XII. Trade policy
20 Trade policy I: Determinants of the structure of protection  
21 Trade policy II: Tariff retaliation and the World Trade Organization (WTO)  
22 Trade policy III: Regionalism versus multilateralism Problem set 4 due and final exam 2 days after Ses #22

 

Additional units, time-permitting, include Trade and Institutions, Sorting in Trade and Foreign Direct Investment (FDI), and Trade and Geography.