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First semester 2016

Advanced International Trade (109) Delhi School of Economics

Master in Economics

Class: Monday (3.05-4.15 PM) Wednesday (1.50 – 3.00 PM) Lecture Room: Lecture Theatre Course description: This course will discuss topics in the area of international trade and trade policy, reviewing traditional theories of international trade and recent developments in the economic literature based on the New trade theory and on the analysis of FDI and global production chains. The discussion of trade policy will cover diverse topics such as export restrictions, the economics of trade agreements and the political economy of trade policy. Textbook

Feenstra, R. (2004). Advanced International Trade: Theory and Evidence, Princeton University Press Specific chapters and additional articles will be mentioned as we proceed with the lectures. Topics: 1. Comparative Advantage, Gains from Trade, International Equilibrium and Ricardo *Feenstra, Chapters 1. Eaton, J. and S. Kortum, “Technology, Geography, and Trade,” Econometrica, September 2002, Vol. 70, No. 5, 1741-1780.

Bernhofen, and Brown. "A Direct Test of the Theory of Comparative Advantage: The Case

of Japan." Journal of Political Economy 112, no. 1 (2004): 48–67.

———. "An Empirical Assessment of the Comparative Advantage Gains from Trade:

Evidence from Japan." American Economic Review 95, no. 1 (2005): 208–25.

Costinot, Arnaud, Donaldson, Dave "How Large Are the Gains from Economic Integration? Theory and Evidence from U.S. Agriculture, 1880-2002" August 2011. Preliminary Draft see Donaldson's website

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2. H_O trade model *Feenstra, Chapters 2-3.

Hartigan. "Specialization and the Volume of Trade: Do the Data Obey the Laws?" Handbook

of International Trade: Economic and Legal Analyses of Trade Policy and Institutions. Vol.

2. Edited by Choi and Hartigan. Wiley-Blackwell, 2005

Blum, Bernardo S. "Endowments, Output, and the Bias of Directed Innovation." Review of

Economic Studies 77, no. 2 (2010): 534–59.

Morrow, Peter M. "Ricardian-Heckscher-Ohlin Comparative Advantage: Theory and

Evidence." Journal of International Economics 82, no. 2 (2010): 137–51.

Romalis, John. "Factor Proportions and the Structure of Commodity Trade." American

Economic Review 94, no. 1 (2004): 67–97.

Schott, Peter K. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production."

American Economic Review 93, no. 3 (2003): 686–708.

———. "Across-Product Versus Within-Product Specialization in International Trade." The

Quarterly Journal of Economics 119, no. 2 (2004): 647–78.

3. Trade in intermediate inputs and wages *Feenstra, Chapters 4.

Grossman, G. "The Distribution of Talent and the Pattern and Consequences of International

Trade." Journal of Political Economy 112, no. 1 (2004): 209–39.

Ohnsorge, F., and D. Trefler. "Sorting It Out: International Trade and Protection with

Heterogeneous Workers." Journal of Political Economy 115, no. 5 (2007): 868–92. (NBER

Working Paper no. 10959)

Acemoglu, D., and D. Autor. "Skills, Tasks and Technologies: Implications for Employment

and Earnings." Handbook of Labor Economics 4 (2011): 1043–171.

4. Monopolistic Competition and Trade *Feenstra, Chapter 5 Feenstra, Robert C., 2010, “Measuring the Gains from Trade under Monopolistic Competition,” Canadian Journal of Economics, February, 1-28.

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5. Heterogeneous Firms *Melitz, M.J., “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,” Econometrica (Nov. 2003). *Chaney, Thomas, “Distorted Gravity: Heterogeneous Firms, Market Structure and the Geography of International Trade,” American Economic Review, September 2008, Vol. 98, No. 4. Bernard, Andrew B., Stephen Redding, Peter K. Schott, “Comparative Advantage and Heterogeneous Firms,” Review of Economic Studies, 2007, vol 74, January. Arkolakis, Costas (2008), "Market Penetration Costs and the New Consumers Margin in International Trade," NBER working paper 14214 Bernard A. and J. B. Jensen (2004), “Why Some Firms Export”, The Review of Economics and Statistics, Vol. 86, No. 2. Eaton, Jonathan, Samuel Kortum, and Francis Kramarz (2008), “An Anatomy of International Trade: Evidence from French Firms” NBER Working Paper #14610. Maiti, D. (2013), “Market Imperfections, Trade Reform and Total Factor Productivity Growth: Theory and Practices from India”, Journal of Productivity Analysis, 40(2), 407-18 (Springer); http://hdl.handle.net/10.1007/s11123-012-0313-z 6. FDI *Brainard, L. (1997). "An Empirical Assessment of the Proximity-Concentration Trade-off

Between Multinational Sales and Trade." American Economic Review 87(4), p.520-44.

*Helpman, E. (1984). "A Simple Theory of International Trade with Multinational Corporations." Journal of Political Economy 92(3), p.451-71.

Helpman, E., Melitz, M. and S. Yeaple (2004). "Exports versus FDI with Heterogeneous Firms."

American Economic Review 94(1), p.300-16. Brainard, S. Lael (1993), "A Simple Theory of Multinational Corporations and Trade with a Trade-off between Proximity and Concentration," NBER Working Paper 4269. Boston Consulting Group (2006), "The New Global Challengers: How 100 Top Companies from the Rapidly Developing Economies are Changing the World," Boston: The Boston Consulting Group. Markusen, J. and A. Venables (2000). "The Theory of Endowment, Intra-industry and Multi-national Trade." Journal of International Economics 52, p.209-34. Fajgelbaum Grossman Helpman (2012) "A Linder Hypothesis for Foreign Direct Investment" working paper Carr, D., Markusen, J. and K. Maskus (2001). "Estimating the Knowledge-Capital Model of the Multinational Enterprise." American Economic Review 91(3), p.693-708. Nunn, N. (2007). "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade." Quarterly Journal of Economics 122(2), p.569-600.

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Acemoglu, D., Antràs, P. and E. Helpman (2007). "Contracts and Technology Adoption." American Economic Review 97(3), p.916-43. 7. Global Production *Helpman, E., “Trade, FDI, and the Organization of Firms,” JEL (Sept. 2006). *Pol Antràs, 2003. "Firms, Contracts, And Trade Structure," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1375-1418, November. Antras, P. and E. Rossi-Hansberg, “Organizations and Trade,” Annual Review (Sept. 2009). Antràs, P. and E. Helpman (2004). "Global Sourcing." Journal of Political Economy 112, p.552-

80. Yeaple, S. (2006). "Foreign Direct Investment, and the Structure of U.S. Trade." Journal of the

European Economic Association 4, p.602-11. Yi, Kei-Mu Can Vertical Specialization Explain the Growth of World Trade? Journal of political Economy, 2003 (2003) Helpman, E., M.J. Melitz and S.R. Yeaple, “Exports versus FDI with Heterogeneous Firms,” AER (March 2004). Antras, Garicano and Rossi-Hansberg (2006) "Offshoring in a Knowledge Economy" Quarterly Journal of Economics, February 2006. 8. Trade in Tasks *Grossman and Rossi-Hansberg (2010) Task Trade between Similar Countries, working paper Costinot Vogel Wang (2011) An Elementary Theory of Supply Chains Working Paper Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies Alan S. Blinder, 2009. "How Many US Jobs Might be Offshorable?," World Economics, World Economics, Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 10(2), pages 41-78, April 9. Political Economy of Trade Policy *Feenstra Chapter 9 Freund, C. and C. Ozden (2008). "Trade Policy and Loss Aversion". American Economic Review, 98:4, 1675-91. Limao, N. and P. Tovar “Policy Choice: Theory and Evidence from Commitment via International Trade Agreements,” Journal of International Economics. November 2011, 85(2), p. 186-205

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Ludema, R., A. Mayda and P. Mishra, “Protection for Free? The Political Economy of U. S. Tariff Suspensions,” mimeo, Georgetown (June 2010). Saggi, K. and H. Yildiz, “Bilateralism, Multilateralism and the Quest for Global Free Trade,” JIE (forthcoming). 10. Theory of Trade Agreements Feenstra , ch 6 *Bagwell Staiger (1999) "An Economic Theory of the GATT" American Economic Review VOL. 89 NO. 1 *Antras and Staiger (2011) “Offshoring and the Role of Trade Agreements,” AER Bagwell, K. and R. W. Staiger, 2001, Domestic Policies, National Sovereignty and International Economic Institutions, Quarterly Journal of Economics, 116:2, 519-562. Broda, C., Limao, N. and D. Weinstein, “Optimal Tariffs and Market Power: The Evidence,” AER, (December 2008). Bagwell, K. and R.W. Staiger, “Backward Stealing and Forward Manipulation in the WTO,” JIE (September 2010). Maggi, G. and A. Rodriguez-Clare, 2007, A Political-Economy Theory of Trade Agreements, American Economic Review, 97:4, 1374-1406. Maggi, G. and R.W. Staiger, “The Role of Dispute Settlement Procedures in International Trade Agreements,” QJE (forthcoming). Ossa, R., “A ‘New Trade’ Theory of GATT/WTO Negotiations,” mimeo (Feb. 2009).

11. Trade and development

Reference will be supplied

Assessments: Assignments & Project (including presentation) – 30% Final Exam - 70%

Exact form of assessment during the course will be inform during the lecture.