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37010 Vorlesung: Fundamentals of International Trade (WiSe 22/23)
Lecturers/instructors
Course times
Di. 16:00 - 18:00 (wöchentlich), Ort: (ISA) SR 007, (PHIL) HS 2Course venue
(ISA) SR 007: Di. 16:00 - 18:00 (12x), (PHIL) HS 2: Di. 16:00 - 18:00 (2x)Start date
Di., 18.10.2022 16:00 - 18:00 Uhr, Ort: (PHIL) HS 2ECTS credits
5Teaching contact hours per week
Description
Both theoretical and empirical research on international trade has surged in the last two decades. All these recent developments are deeply rooted in two fundamental and analytically very tractable models of international trade: the basic two-country-two-goods Ricardian model and the model by Krugman (1980). One of the main objectives of this course will be to put students in a position to solve these models analytically and to deepen their understanding of economic modeling in general.While the (relatively simple) analytical solutions to the Ricardian and the Krugman model are derived in this course, the seminal papers that started the large and active recent literature in international trade (Eaton and Kortum, 2002, and Melitz, 2003) will be covered on an intuitive and graphical basis. This will be simple to do as they directly build on the Ricardian and the Krugman model. The analytical solutions to the advanced models of international trade, along with the literature they triggered, are the subject of the course “Advanced International Trade” usually offered in the summer term.
One key result of the Ricardian model of international trade is that everybody always gains from trade. This implication is strikingly at odds with reality – and is widely criticized and ridiculed in the public debate (often along with the whole economics profession). Starting from the question if this implies that the Ricardian model is a “bad” model and if models in economics can help to understand anything about the real world at all, we will learn more about how (not) to interpret the results of theoretical models in economics, how to judge their assumptions and implications and ultimately how to decide if a model (specifically, the Ricardian model) is “a good model” or not.
The theoretical focus of the course is complemented by a lecture on stylized facts on global trade and by a chapter on the gravity equation – the leading empirical tool in the analysis of international trade data. The empirical aspects of the course will be deepened and extended to state of the art empirical trade research in the course “Empirical International Trade” usually offered in the summer term.
List of topics:
1. Trade in the Global Economy
2. Trade and Technology: the Ricardian Model of Trade
3. Critical Assessment of the Ricardian Model of Trade
4. Modern Ricardian Trade Models: Dornbusch, Fischer and Samuelson (1977) and Eaton and Kortum (2002)
5. Increasing Returns to Scale and Monopolistic Competition: Krugman (1980)
6. Firm Heterogeneity in International Trade
7. Empirics of International Trade: the Gravity Equation
Home institution
Lehrstuhl für International EconomicsInvolved Institutions
Credit transfers
Pre-requisites
Solid knowledge of undergraduate (Bachelor-level) Microeconomics is recommended.Mode of study
For the winter term 2022/23 this course is planed with in-class lectures and exercise classes. No video recordings of lectures or exercise classes will be provided. In the unlikely event that the university of Passau will switch to online teaching in the winter term 2022/23, the course will be adjusted as follows: (1) videos of both lectures and exercise classes will be made available online. In addition, both for the lecture and exercise classes there will be live sessions in Zoom where material will be discussed in the group. (2) We will focus on the general topic “The Krugman (1980) model and its role for the ‘New Trade Theory’”. This focus will involve students working on different aspects of this topic in small groups where they will prepare short video presentations on their respective topics.Assessments
Exam 90 Min. + 10 min. reading time, 100 % In the unlikely case of online teaching: Portfolio: The final grade consists of - 66,67% final exam, 60 min. + 10 min. reading time - 33,33% video presentationsIndicative reading list
- Feenstra, Robert C. and Alan M. Taylor: “International Trade”, Worth Publishers, 4th edition. (The book “International Economics“ by the same authors covers the same topics.)
- Dornbusch, R., S. Fischer and P. A. Samuelson (1977). “Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods.” In: The American Economic Review 67 (5), pp. 823–839.
- Eaton, J. and S. Kortum (2002). “Technology, Geography, and Trade.” In: Econometrica 70, pp. 1741–1779.
- Krugman, P. (1980). “Scale Economies, Product Differentiation, and the Pattern of Trade.” In: The American Economic Review 70 (5), pp. 950–959.
- Melitz, M. J. (2003). “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.” In: Econometrica 71, pp. 1695–1725.
- Anderson, James E. and Eric van Wincoop (2003). “Gravity with Gravitas: A Solution to the Border Puzzle.” In: The American Economic Review 93 (1), pp. 170–192.
Additional information
This course provides the basis for further courses related to International Trade and Globalization like “The Empirics of International Trade“ and “Advanced International Trade“.For further lectures and seminars offered by the faculties in German please refer to the German version of this website.
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