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Professor Alokesh Barua and Dr. Aparna Sawhney CITD, 2012

Pure Theory of International Trade (DI 611)

Pre-requisite: BasicMicroeconomic TheoryandInternational Trade. (Students who do nothave 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 gainsfrom 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

weights as follows: Midterm (40%); Presentations (20%); and Final Examination (40%).

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 1990sIntegrations 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 ofEconomics and Political Science, Volume 5(2): 195-205. Bhagwati, Panagariya and Srinivasan (1998) Chapters 1, 2, 5 and 6. Feenstra (2004) Chapter 1III. Specific Factor and Trade Ronald W Jones, A ThreeFactor Model in Theory, Trade, and History in Bhagwati

Baldwin ed.

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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 ExpansionAmerican EconomicReview, Volume 48: 94153.

Batra, Chapter 1 4 and Chapter 6Endogenous 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, inRaymond Vernon ed. The Technology Factor in International Trade, NBER and Columbia

University Press: 73-90

V. Monopolistic Competition, Oligopoly and TradeProduct 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 ofInternational 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 TheoryA. 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 ofInternational 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 Growthand Trade, University of Michigan Press, Ann Arbor

Jeffrey Frankel and David Romer (1999) Does Trade Cause Growth, American EconomicReview, 379-399.

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Hallak and Levinsohn (2004) Fooling Ourselves: Evaluating the Globalization and GrowthDebate, NBER Working Paper 10244.

Greenwald, Bruce, and Joseph Stiglitz (2006) Helping Infant Economies Grow: Foundationsof 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 PoliticalEconomy, Volume 99: 483-499

Davis, Donald R. And David E. Weinstein (1999) Economic Geography and regionalproduction 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 andProductivity: Evidence from Indonesia, American Economic Review, Volume 97 (5): 1611-

1638. 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 inMexico,Industrial and Labour Relations Review, Volume 52(2): 271-288.

Kumar, Utsav and Prachi Mishra (2008) Trade Liberalization and Wage Inequality:Evidence from IndiaReview of Development Economics, Volume 12 (2): 291-311.

Trade and Environment

Grether, Jean-Marie, Nicoel Andrea Mathys and Jaime de Melo (2010) Unravelling theworldwide pollution haven effect, The Journal of International Trade and Economic

Development: 1-32.

Waldkirch, Andreas and Munisamy Gopinath (2008) Pollution Control and Foreign DirectInvestment in Mexico: An Industry-Level AnalysisEnvironmental and Resource Economics,

41: 289-313.

Elliott, Robert J.R. and Kenichi Shimamoto (2008) Are ASEAN Countries Havens forJapanese Pollution-Intensive Industry?The World Economy: 236-254.