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International trade and Globalization

This syllabus will be updated regularly.

The objective of the course is to offer students an introduction to the theory and empirics of international trade. The course will cover both theoretical and empirical contributions and will often refer to current issues of globalization. Among the treated questions are:  What are the similarities and differences between the current globalization wave and the one that took place in the late 19th century? Why do countries trade? Is China growth bad for Western countries? Does globalization deepen wage inequality?   How does trade affect competition? What are the characteristics of exporters and firms? What are the consequences of protectionism?

Without being compulsory, mastering the concepts of a first year microeconomics lecture is a very strong advantage when following this course.

Grading:

50% take-home paper; find an article (The Economist, FT, voxeu, working papers of WTO, World Bank…) which deals with a subject of international trade and globalization. In a 4-8 pages (max) document use the theoretical mechanisms analyzed in the course to illustrate and criticize the article and/or the theory and go deeper in the issue at stake.

Term paper to be handed back not later than November 21st (by email to Eve Sihra)

The paper can be written in groups of 3 students minimum and 4 students maximum.

50% final exam: short questions, exercises, short essay (1/3 each approximately)

Some examples of very good term-papers last year :

(1) on article, (2) on article, (3) and (4)

NEW: Exercices and solutions on the Ricardian model , HOS model and Standard model. Other exercises on the standard model and economies of scale (revised and expanded).
Additional exercises here.
New exercise on trade policies
 

Reference:

  • Krugman, Paul R., Maurice Obstfeld and Marc Melitz (KOM) International Economics, Pearson 9th edition.

 

1) Globalization: present and precedents (lecture 1 and 2)

Slides

Textboook :

* KOM : chapter 2

Complements :

Two Waves of Globalisation: Superficial Similarities, Fundamental Differences , Philippe Martin and Richard Baldwin, NBER WP 6904.

Globalisation and the costs of international trade from 1870 to the present, David Jacks   Christopher M. Meissner  Dennis Novy, VOXEU

Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy, Kevin H. O’Rourke et Jeffrey G. Williamson, MIT Press, Cambridge, 1999.

Capturing value in global networks: Apple's iPad and iphones, Kraemer, Greg Linden, and Jason Dedrick, 2011

The shifting geography of global value chains, WTO 2012.

Global supply chains: Why they emerged, why they matter, and where they are going, Richard Baldwin, CEPR Discussion paper DP9103

Chapter 4 of the 2013 World Investment Report (UNCTAD) is on Global Value Chains, 2013. They estimate that 28% of total gross trade is foreign value added in exports (so "double counting"). See graph below

2)    Comparative advantage : the ricardian model (lectures 3 and 4)

 Slides

* Textboook : KOM : chapitre 3

Issues : Productivity, wages and trade, competitiveness and trade

 

Complements :

 Ricardo's difficult idea, a short essay by Paul Krugman

A Flat World, a Level Playing Field, a Small World After All, or None of the Above? A  Review of Thomas L. Friedman’s The World is Flat EDWARD E. LEAMER

http://www.anderson.ucla.edu/faculty/edward.leamer/pdf_files/mar07_leamer.pdf

The End of Cheap Chinese Labor by Li, Li, Wu, and Xiong,  Journal of Economic Perspectives—Vol. 26, Number 4—Fall 2012—Pages 57–74. Chinese wages have invcreased fast since the mid1990s. See graph below

3)    Globalization, inequality and wages: the HOS model (lectures 4 and 5)

Slides (Theory)

Slides (empirics)

* Textboook : KOM : chapter 5

Issues : How does trade affect inequality ?

Complements :
 

Trade and wages reconsidered, Paul Krugman, 2008, Princeton

Trade and inequality revisited, Paul Krugman, 2007, Vox-EU

China and Wal-Mart: Champions of equality, Christian Broda

Behind the new view of globalization, Economix, 2012

 More technical:

Ann Harrison, John McLaren, Margaret McMillan (2011), Trade and Inequality, Annual Review of Economics

Trade and inequality: New insights from Brazil, Oleg Itskhoki, Marc Muendler, Stephen Redding, Elhanan Helpman, 2012, VOXEU

http://www.voxeu.org/article/trade-and-inequality-new-insights-brazil

Goldberg, Pinelopi K and Nina Pavcnik (2007), “Distributional Effects of Globalization in Developing Countries”, Journal of Economic Literature, 45(1):39-82.

On rising inequalities, see the World Top Incomes Database (F. Alvaredo, A. Atkinson, T. Piketty, E. Saez, 2011-2013). See graph below on top decile share of income in Europe and US

4)    The standard trade model: Terms of trade, growth and trade (lecture 6)

Slides

* Textbook : KOM : chapter 6

Issues : Is China growth bad for Western countries ?

 

Samuelson, Paul A (2004), “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization”, Journal of Economic Perspectives 18(3): 135–46.

Acemoglu, utor,  Dorn,  Hanson, Price, The rise of China and the future of US manufacturing, VOXEU, September 2014

5)    International Trade, economies of scale and imperfect competition (lectures 7 and 8)

Slides

* Textboook : KOM : chapitre 8

Issues : What is the role of history in trade patterns? What is the justification for infant industry protection? Why do we trade similar goods ? How does trade affect competition and market structure? What are the effects of European trade integration?

Complements :

Fontagné L., Freudenberg M., Gaulier G. (2006), A Systematic Decomposition of World Trade into Horizontal and Vertical IIT, Review of World Economics, 142(3):459-475.

Is Variety the Spice of Life? New York Times

More technical, the original paper by Krugman “Increasing Returns, Monopolistic Competition and International Trade”, Journal of International Economics 9, 469-479.

 

6)    The decision to export: firms and international markets (lecture 9)

 Slides

* Textboook : KOM : chapter 8

Issues : what are the characteristics of exporters ? How does trade openness affect different firms ? Why do some firms gain and others loose? What is the effect on aggregate productivity?

 

Complements :

Atkin David, Amit Khandelwal, Adam Osman, Exporting and firm performance: Evidence from Egyptian rug manufacturers, December 2014, VOXEU

* Mayer T. and G.. Ottaviano, 2007, ``The happy few: new facts on the internationalisation of European firms'',  Bruegel-CEPR  EFIM2007 Report, Bruegel Blueprint Series.

 

Crozet M. & T. Mayer, 2007. "The very select club of exporting firms", Lettre du CEPII

 

7)    Offshoring and multinationals (lecture 10)

 Slides

* Textbook : KOM : chapter 8

Issues : what are the reasons to offshore production ? The determinants of Foreign Direct Investment. Trade integration and the geography of production

 Globalization and the rise of the robots, Dalia Marin, VOXEU, november 2014

UNCTAD, World Investment report, 2014.

 More technical:

La désindustrialisation en France, Lilas Demmou 2010

Mayer, T., I. Méjean and B. Nefussi, 2010, ``The Location of Domestic and Foreign Production Affiliates by French Multinational Firms'', Journal of Urban Economics

8)    Trade Policies in industrialized and developping countries (lectures 11-12)

Slides (part 1)

Slides (part 2)

 

* Textboook : KOM : chapters 9 to 12

Issues: Who gains, who looses from protectionism? What is the rational to restrict trade? Strategic trade policies, trade negociations and WTO, the trend towards regionalism and regional trade agreements

 

Complements :

Multilateral trade pacts are increasingly giving way to regional ones, The Economist, October 12 2013.

Protectionism can take many forms, not all of them obvious, The Economist, October 12 2013

Applied protection in 2007, Cepii 2012,  Guimbard, Jean, Mimouni and Pichot

Why do trade negotiations take so long? Christoph Moser, Andrew K Rose, 8 Jun 2012, Vox EU

The protectionist temptation: Lessons from the Great Depression for today, Barry Eichengreen   Douglas Irwin

TTIP is about regulatory coherence, Lionel Fontagne and Sebastien Jean, VOXEU, November 2014

More technical:

Broda, Christian, Nuno Limao, and David E. Weinstein. 2008. "Optimal Tariffs and Market Power: The Evidence." American Economic Review, 98(5): 2032-65.

 

Trade controversies:

Does Fair trade achieve its goals?

http://scholar.harvard.edu/nunn/publications/economics-fair-trade

Is trade bad for the environment ?

http://www.voxeu.org/article/dirty-trade-how-important-are-greenhouse-gas-emissions-international-transport

Is trade good for peace ?

http://www.voxeu.org/article/trade-andor-war

Does trade increase growth ?

http://www.voxeu.org/article/openness-international-trade-causes-growth-sub-saharan-africa