INTERNATIONAL TRADE

Time & place:






Lecture:

Wednesday, 8:30 – 10:00




Room:






Start:






Examination:






Exam:

90 Min. (6 CP)




Examination date:






Examination requirements:

Demonstrate a profound knowledge of the core theoretical concepts in international trade,

show the ability to analyze the welfare and distributional effects of international trade by means of graphical and mathematical tools

show the ability to analyze the effects of trade policies,

students should be able to assess the theoretical models with respect to empirical applications.

Requirements:

none




Learning outcome, core skills:

After a successful completion of the course students have achieved following competences:

give an overview of the core theoretical concepts explaining international trade patterns by means of various sources of trade flows like different technologies or factor endowments,

understand and apply the concepts of comparative and absolute advantage,

analyze the effects of international trade on the trading partners with respect to (i) their production and overall welfare, (ii) the reallocation of resources in theproduction process, (iii) the change in factor prices,

evaluate and critically reflect the gains and losses of international trade,

evaluate the consequences of different trade policies like tariffs and subsidies.

Content of the lecture:

The Ricardian model

Mathematical and graphical analysis of the trade equilibrium in a neoclassical model explaining inter-industry trade with one production factor and (i) two goods, as well as (ii) a continuum of goods. Analysis of the trade effects on production and consumption, wages and overall welfare gains from trade.



The Heckscher-Ohlin model

Mathematical and graphical analysis of the trade equilibrium in a neoclassical model with two production factors. Analysis of trade effects on production and consumption, factor prices, and of distributional effects as implied by the Stolper-Samuelson Theorem. Analysis of the effects of changes in resource endowments as implied by the Rybczynski Theorem. Empirical test of the Heckscher-Ohlin model.Generalization of the Heckscher-Ohlin model to many production factors and goods by means of the Heckscher-Ohlin-Vanek model. Empirical test of Heckscher-Ohlin-Vanek model. Derivation of the specific-factors model with more production factors than goods and analysis of changes in goods prices and factor endowments.



Imperfect competition in international trade

Mathematical and graphical analysis of the Krugman model with increasing returns to scale and monopolistic competition as an explanation of intra-industry trade. Non-formal extensions of the Krugman model with (i) consumer CES preferences and (ii) heterogeneous technologies across firms, and the Melitz model. Formal derivation of the empirical Gravity equation based on the endowment model and on the monopolistic competition model.




Recommended literature: