International Trade and Investment: Theory and Policy

Fall 2005

John Kennes
Assistant Professor
Department of Economics
University of Copenhagen

Studiestræde 6
DK-1455 Copenhagen K
Phone +45 35 32 30 31
Fax +45 35 32 30 00

E-mail john.robert.kennes@econ.ku.dk

 

FAQ

What are the goals of this course?

A) Gain a better appreciation of well known economic concepts from game theory, microeconomics, econometrics, political economy, etc

B) Gain skills needed to do independent research on international trade questions.

C) Acquire the skills needed to answer the following types of questions.

  1. Are trade patterns determined by comparative advantage? Give a fully articulated example where this is the case.
  2. What is an alternative explanation (to the theory of comparative advantage) of trade patterns? Give a fully articulated example where this is the case.
  3. Suppose factors of production – labor, capital, etc - are not mobile. Why might factor prices be equalized between two countries who have different factor endowments, but who are engaged in free trade?
  4. Does an increase in the relative price of a good increase the real return to the factor used intensively in that good, and reduce the real return to the other factor?
  5. Does an increase in a factor endowment, increase the output of the industry using it intensively, and decrease the output of the other industry?
  6. Feenstra. Question 1.5
  7. Why might a country export the good that uses its abundant factor intensively?
  8. Discuss two methods by which the assumptions of the Hecksher-Ohlin-Vanek (HOV) model can be modified to get a better fit of the data.
  9. Discuss how the HOV model and its modifications can be tested empirically.
  10. Does factor price equalization hold if there are more factors than goods?
  11. Is production determinant if there are more goods than factors? What are some implications of indeterminancy?
  12. Feenstra. Question 4.1
  13. What is the gravity equation? Discuss several aspects of trade that are tested using models based on the gravity equation.
  14. Under perfect competition, is the optimal tariff for a small country less than the optimal tariff for a large country? When is the order reversed?
  15. What is the optimal tariff for a small country facing a foreign monopolist?
  16. What is reciprocal dumping? Give a theoretical example of equilibrium reciprocal dumping.
  17. Is a tariff equivalent to a quota? Give an example where this is true. Can you also give an example where it is false?
  18. What is a voluntary export restraint? Give a fully articulated example where an export restraint is voluntary.
  19. Describe at least one prediction for international trade of the median voter model. Give a fully articulated example in support of your prediction.
  20. Describe at least one prediction for international trade of the protection for same model. Give a fully articulated example in support of your prediction.

What are the prerequisites?

It will be helpful to have basic knowledge of calculus, microeconomics and econometrics.

How to achieve these goals?

  1.  Regular attendance

  2. Read textbook and assigned papers

  3.  Participation in organized study groups

  4. Directed problem solving

 How will achievement of goals be evaluated?

  1. Study group participation (weight = minor)

  2. Final Examination grade d by a censor and the instructor (weight = major)

 What are the readings?

  1. Robert Feenstra (2004) Advanced International Trade, Princeton University Press

  2.  Selected papers

 Where and when do we meet?

  • We meet Tuesday 10:00-12:00 and Friday 12:00 – 14:00 in room

 How to contact the professor?

  1. Send me an e-mail: john.robert.kennes@econ.ku,dk

  2. Visit my office: Second floor, 02-039, in Studiestræde 6

  3. Telephone: 35 32 30 31

  4. Secretary: Tanya Graasbøll

Some papers that are discussed during the first month

  1. Samuelson, Paul (1949) Internation Factor Price Equalization Once Again, Economic Journal
  2. Stolper, Wolfgang and Paul Samuelson (1941) Protection and Real Wages, Review of Economic Studies
  3. Dixit, Avinash and Victor Norman (1980) Chapter 3, Theory of International Trade, Cambridge University Press
  4. Jones, Ronald (1965) The Structure of Simple General Equilibrium Models, Journal of Political Economy
  5. Rybczynski, T. N. (1955) Factor Endowments and Relative Commodity Prices, Economica
  6. Leontief, Wassily W. (1953) Domestic Production and Foreign Trade: The American Capital Position Reexamined. Precedings of the American Philosophic Society
  7. Vanek, Jaroslav (1968) Factor Proportions Theory: The N-Factor Case, Kyklos
  8. Leamer, Edward, E. (1980) The Leontief Paradox, Reconsidered, Journal of Political Economy
  9. Baldwin, Robert (1971) Determinants of the Commodity Structure of US trade, American Economic Review
  10. Leamer, Edward E. (1984) Sources of International Comparative Advantage: Theory and Evidence. MIT press
  11. Bowen, Leamer and Sveikauskas (1987) Multicountry, Multifactor Test of the Factor Abundance Theory, American Economic Review
  12. Treffler (1998) The Structure of Factor Content Predictions University of Toronto manuscript
  13. Davis and Weinstein (2001) An Account of Global Factor Trade, American Economic Review
  14. Deardorff (1984) The General Validity of the Law of Comparative Advantage, Journal of Political Economy
  15. Helpman, Elhanan (1984) The Factor Content of Foreign Trade, Economic Journal
  16. Jones, Ronald, and Jose Scheinkman (1977) The Relevance of the Two Sector Production Model in Trade Theory, Journal of Political Economy
    17.