Professor Alokesh Barua and Dr.

Aparna Sawhney

CITD, 2012

Pure Theory of International Trade (DI 611)

Pre-requisite: Basic Microeconomic Theory and International Trade. (Students who do not have adequate background would be required to cover supplementary basic readings.) This course will cover the fundamentals of the pure theory of international trade including the classical and neo-classical trade theories, the development of imperfect competition in trade, trade and technology, positive trade policy analysis, factor market imperfections and gains from trade. The study of the theoretical trade models will be supplemented with empirical literature. Students are expected to do the readings before the corresponding class. Required textbooks: Jagdish Bhagwati, Arvind Panagariya and T.N. Srinivasan (1998) Lectures on International Trade, MIT Press, 2nd edition Robert C. Feenstra (2004) Advanced International Trade: Theory and Evidence, Princeton University Press, (Indian edition 2007) R. N. Batra (1973), Studies in the Pure Theory of International Trade, Macmillan Course Evaluation
The course grade will be based on the performance in presentations and examinations with component Examination (40%). weights as follows: Midterm (40%); Presentations (20%); and Final

The modules and readings are as follows: I. Introduction

Elhanan Helpman (1999) The Structure of Foreign Trade, Journal of Economic Perspective 13(2): 121-144. Donald R. Davis (2000) Understanding International Trade Patterns: Advances of the 1990s Integrations and Trade, Volume 4 (10).

II. Basic Theorems in the Pure Theory of Trade and Policy Samuelson, P. A (1953), Prices of Factors and Goods in General Equilibrium, The Review of Economic Studies, Volume 21 (1): 1-20. Samuelson, P. A (1939), The Gains from International Trade, Canadian Journal of Economics and Political Science, Volume 5(2): 195-205. Bhagwati, Panagariya and Srinivasan (1998) Chapters 1, 2, 5 and 6. Feenstra (2004) Chapter 1

III. Specific Factor and Trade Ronald W Jones, A ThreeFactor Model in Theory, Trade, and History in Bhagwati Baldwin ed.

Bhagwati, Panagariya and Srinivasan (1998) Chapter 7.

IV. Technical Change and Trade Exogenous Technical Change and Trade: The Competitive Models Bhagwati, J. (1958), International Trade and Economic Expansion American Economic Review, Volume 48: 94153. Batra, Chapter 1 4 and Chapter 6 Endogenous Technical Change: The Role of Monopoly S.B. Linder (1961) An Essay on Trade and Transformation, Wiley, New York: Chapter 3. M V. Posner (1961) Technological Change and International Trade, Oxford Economic Papers, Volume 13(3): 323-341 R. Vernon (1966), "International Investment and International Trade in Product Cycle", Quarterly Journal of Economics, Volume 80(2): 190-207 Ronald W. Jones (1970) The Role of Technology in the Theory of International Trade, in Raymond Vernon ed. The Technology Factor in International Trade, NBER and Columbia University Press: 73-90

V. Monopolistic Competition, Oligopoly and Trade Product Differentiation, Economies of Scale and Trade Paul Krugman (1980) "Scale Economies, Product Differentiation and the Pattern of Trade", American Economic Review, Volume 70(5): 950-959. Bhagwati, Panagariya and Srinivasan (1998) Chapter 11 Feenstra (2004) Chapter 5 Oligopoly and Trade James A. Brander and Paul R. Krugman, A Reciprocal Dumping Model of International Trade, in G. M. Grossman ed. Imperfect Competition and International Trade

Strategic Trade Policy

James A Brander and Barbara J. Spencer, Tariff Protection and Imperfect Competition in G. M. Grossman ed. Imperfect Competition and International Trade

VI. Empirics of Trade Theory A. Testing of Trade Models Bhagwati, Panagariya and Srinivasan (1998) Chapter 8. Feenstra (2004) Chapter 2 Daniel Trefler (1995) The Case of Missing Trade and Other Mysteries, American Economics Review 85: 1029-46. Leamer, Edward E. (2007) Linking the Theory with the Data: That is the Core Problem of International Economics, Handbook of Econometrics, Volume 6, Part A: 4587-4606. B. Trade and Growth Ngo Van Long and Kar Yiu Wong, (2000), Endogenous Growth and International Trade: A Survey, in B. S. Jensen and Kar Yu Wong ed., Dynamics, Economic Growth and Trade, University of Michigan Press, Ann Arbor Jeffrey Frankel and David Romer (1999) Does Trade Cause Growth, American Economic Review, 379-399.

Hallak and Levinsohn (2004) Fooling Ourselves: Evaluating the Globalization and Growth Debate, NBER Working Paper 10244. Greenwald, Bruce, and Joseph Stiglitz (2006) Helping Infant Economies Grow: Foundations of Trade Policies for Developing Countries, American Economic Review,

Readings for class presentation and discussion

Trade and Economic Geography P. R. Krugma (1993), The hub effect: Or threeness in international trade in Winfried Ethier, Elhanan Helpman and J. Peter Neary ed. Thory, Policy and Dynamics in International Trade P. R. Krugman (1991) Increasing Returns and Economic Geography, Journal of Political Economy, Volume 99: 483-499 Davis, Donald R. And David E. Weinstein (1999) Economic Geography and regional production structure: An empirical investigation, European Economic Review, Volume 43: 379-407. Trade and Product Variety Amiti, Mary and Jozef Konings (2007) Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia, American Economic Review, Volume 97 (5): 16111638. Goldberg, Penelopi, Amit Khandelwal, Nina Pavcnik and Petia Topalova (2010) Imported Intermediate Inputs and Domestic Product Growth: Evidence from India, Quarterly Journal of Economics: 1727-1767. Trade and Wage Inequality Hamid Beladi and Ravi Batra, (2004), Traded and Non-traded Goods and Real Wages, Review of Development Economics, 8 (1), 1 14. Hanson, Gordon and Ann Harrison (1999) Trade Liberalization and Wage Inequality in Mexico, Industrial and Labour Relations Review, Volume 52(2): 271-288. Kumar, Utsav and Prachi Mishra (2008) Trade Liberalization and Wage Inequality: Evidence from India Review of Development Economics, Volume 12 (2): 291-311. Trade and Environment Grether, Jean-Marie, Nicoel Andrea Mathys and Jaime de Melo (2010) Unravelling the worldwide pollution haven effect, The Journal of International Trade and Economic Development: 1-32. Waldkirch, Andreas and Munisamy Gopinath (2008) Pollution Control and Foreign Direct Investment in Mexico: An Industry-Level Analysis Environmental and Resource Economics, 41: 289-313. Elliott, Robert J.R. and Kenichi Shimamoto (2008) Are ASEAN Countries Havens for Japanese Pollution-Intensive Industry? The World Economy: 236-254.