ITRN 791 Trade Policy

ITRN 791: Advanced Trade Policy Analysis

Revised: February 20, 2019.

Kenneth A. Reinert

Phone: 703-993-8212
Email: kreinert@gmu.edu
Office: Founders Hall, 627
Office hours: Wednesday, 6-7 PM and by appointment.

Course Description

This course introduces the student to both international trade theory and trade policy analysis. It is intensive in graphical analysis. Schar School students should not take this course unless they have either done well in ITRN 504 of have taken PUBP 720. Students from other programs are welcome to take the course if they have completed the equivalent of intermediate microeconomics.

Learning Outcomes

Knowledge and Understanding: This course introduces the student to a more advanced treatment of trade theory than does ITRN 504 and emphasized how this theory helps us understand the reasons for and processes of international trade in goods and services.

Analytic Skills and Abilities: The course develops general equilibrium reasoning in microeconomics as shows how this reasoning can be applied to understanding the political economy of trade and trade policy analysis.

Professional Development and Leadership: The course further introduces the student to the lexicon of trade policy analysis, better preparing the student for potential employment in this field.

Main Texts

Feenstra, R.C. and A. M. Taylor (2017) International Trade, Worth Publishers. To be available at the Arlington bookstore.

Markusen, J.R., J.R. Melvin, W.H. Kaempfer, and K.E. Maskus (1995) International Trade: Theory and Evidence, McGraw-Hill. Note: this excellent text is out of print. See: https://www.scribd.com/doc/34305142/International-Trade-Theory-and-Evidence-by-Markusen-Melvin-Kaempfer-and-Maskus. Important for Ph.D. students.

Other Useful Books

Bhagwati, J., A. Panagariya, and T.N. Srinivasan (1998) Lectures on International Trade, MIT Press.

Feenstra, R.C. (2004) Advanced International Trade: Theory and Evidence, Princeton University Press.

Francois, J.F. and K.A. Reinert (eds.) (1997) Applied Methods for Trade Policy Analysis: A Handbook, Cambridge University Press.

Helpman, E. and P.R. Krugman (1989) Trade Policy and Market Structure, MIT Press.

Hertel, T.W. (ed.) (1997) Global Trade Analysis: Modeling and Applications, Cambridge, University Press.

Hoekman, B. and M. Kostecki (2009)The Political Economy of the World Trading System, Oxford University Press.

Reinert, K.A. (2012) An Introduction to International Economics, Cambridge University Press.

van Marrewijk, C. (2002) International Trade and the World Economy, Oxford University Press.

Vousden, N. (1990) The Economics of Trade Protection, Cambridge University Press.

World Bank (undated) A Guide to Trade Data Analysis.

Course Requirements and Grading

Problem Sets- 20 percent
Midterm exam- 30 percent
Final exam- 30 percent
Class participation- 20 percent

Course Outline and Readings

Weeks 1 and 2: Introduction and Microeconomics of Closed and Open Economies (January 23 and 30)

Feentra and Taylor, Chapter 1.

Ph.D. Students: Markusen et al., Chapters 2, 3, 4, 5, and 6.

Recommended:

Humphrey, T.M. (1996) “The Early History of the Box Diagram,” Federal Reserve Bank of Richmond Economic Quarterly, 82:1, 1996, 37-75.

Maneschi, A. (2009) “Comparative Advantage,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 198-205.

Week 3: Ricardian Model (February 6) Problem Set #1 Handed Out

Feenstra and Taylor, Chapter 2.

Ph.D. students: Markusen et al., Chapter 7.

Recommended:

Bhagwati, Panagariya, and Srinivasan, Chapters 2 through 4.

Deardorff, A. (2009) “Ricardian Model,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 973-980.

Grossman, G.M. and E. Helpman (1995) “Technology and Trade,” in G. Grossman and K. Rogoff (eds.), Handbook of International Economics, Volume III, Elsevier, Amsterdam, 1279-1337.

Ruffin, R.J. (2002) “David Ricardo’s Discovery of Comparative Advantage,” History of Political Economy, 34:4, 727-748.

Stern, R.M. (1962) “British and American Productivity and Comparative Costs in International Trade,” Oxford Economic Papers, 14:3, 275-296.

Week 4: Heckscher-Ohlin Model (February 13)

Feenstra and Taylor, Chapter 4.

Ph.D. students: Markusen et al., Chapter 8.

Recommended:

Bhagwati, Panagariya, and Srinivasan, Chapters 5, 6, and 8.

Panagariya, A. (2009) “Heckscher-Ohlin Model,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 591-597.

Reinert, K.A. and K.W. Roland-Holst (1998) “North-South Trade and Occupational Wages:  Some Evidence from North America,” Review of International Economics, 6:1, 74-89.

Stolper, W. and P.A. Samuelson (1941) “Protection and Real Wages,” Review of Economic Studies, 9:3, 58-73.

Trefler, D. (1995) “The Case of Missing Trade and Other Mysteries,” American Economic Review, 85:5, 1029-1046.

Week 5: No Class Due to Snow (February 20)

Week 6: Specific Factors Model (February 27) Problem Set #1 Due, Problem Set #2 Handed Out

Feenstra and Taylor, Chapter 3.

Ph.D. students: Markusen et al., Chapter 9.

Recommended:

Bhagwati, Panagariya, and Srinivasan, Chapter 7.

Jones, R.W. (2009) “Specific-Factors Model,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 1021-1026.

Jones, R.W. (1971) “A Three-Factor Model in Theory, Trade, and History,” in J.N. Bhagwati et al., Trade, Balance of Payments and Growth, North Holland, 3-21.

Neary, J.P. (1978) “Short-Run Capital Specificity and the Pure Theory of International Trade,” Economic Journal, 88:351, 488-510.

Week 7: Movements of Labor and Capital (March 6) Problem Set #2 Due

Feenstra and Taylor, Chapter 5.

Ph.D. students: Markusen et al., Chapters 21 and 22.

Recommended:

Mundell, R.A. (1957) “International Trade and Factor Mobility,” American Economic Review, 47:3, 321-335.

Purvis, D.D. (1972) “Technology, Trade and Factor Mobility,” Economic Journal, 82:327, 991-999.

Reinert, Chapters 9, 10 and 11.

Week 8: Spring Break (March 13)

Week 9: Midterm Exam (March 20) Note New Date for Midterm

Week 10: New Trade Theory: Increasing Returns to Scale and Imperfect Competition (27 March)

Feenstra and Taylor, Chapter 6.

Ph.D. students: Markusen et al., Chapters 11 and 12.

Recommended:

Bhagwati, Panagariya, and Srinivasan, Chapters 11 and 30.

Krugman, P. (1980) “Scale Economies, Product Differentiation, and the Pattern of Trade,” American Economic Review, 70:5, 950-959.

Matschke, X. (2009) “New Trade Theory,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 829-833.

Ruffin, R.J., “The Nature and Significance of Intra-Industry Trade,” Federal Reserve Bank of Dallas Economic and Financial Review, 1999.

Week 11: Revealed Comparative Advantage, Gravity Models and Applied General Equilibrium Analysis (April 3)

Feentra and Taylor, Chapter 6.

Recommended:

Belassa, B. (1965) “Trade Liberalization and ‘Revealed’ Comparative Advantage,” Manchester School of Economic and Social Studies, 33:2, 92-123.

Reinert, K.A. (2009) “Applied General Equilibrium Models,” K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 74-78.

Reinert, K.A. (2009) “Gravity Models,” K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 567-570.

Rodrigo, G.C. (2009) “Revealed Comparative Advantage,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 971-973.

Weeks 12 and 13: Trade Policy Analysis (April 10 and 17) Problem Set #3 Handed Out

Feenstra and Taylor, Chapters 8, 9 and 10.

Ph.D. Students: Markusen et al., Chapters 15 and 16.

Reinert, K.A. (2014) “Sensitivity Analysis in An Imperfect Substitutes Model of Preferential Trade,” Journal of Economic Studies, 41:5, 630-643.

Recommended:

Francois, J.F. and Hall, H.K. (1997) “Partial Equilibrium Modeling,” in J.F. Francois and K.A. Reinert (eds.) Applied Methods for Trade Policy Analysis: A Handbook, Cambridge:University Press, 122-155. 

Francois, J.F. and Reinert, K.A. (2009) “Partial Equilibrium Models,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.) The Princeton Encyclopedia of the World Economy, Princeton University Press, 891-894. 

Rouslang, D.J. and Suomela, J.W. (1988) “Calculating the Welfare Costs of Import Restrictions in the Imperfect Substitutes Model,” Applied Economics 20:5, 691-700.

Week 14: Guest Speaker (JP Singh on Trade Negotiations) and Brief Introduction to Trade in Value Added and Global Value Chains (April 24) Problem Set #3 Due

Ahmad, N. (2013) “Estimating Trade in Value Added: Why and How?” in D.K. Elms and P. Low (eds.), Global Value Chains in a Changing World, World Trade Organization, 85-108.

Low, P. (2013) “The Role of Services in Global Value Chains,” in D.K. Elms and P. Low (eds.), Global Value Chains in a Changing World, World Trade Organization, 61-81.

Recommended:

Baldwin, R. (2016) The Great Convergence: Information Technology and the New Globalization, Harvard University Press.

Feenstra, R.C. and B. Jensen (2009) “Outsourcing/Offshoring,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), Princeton Encyclopedia of the World Economy, Princeton University Press, 881-887.

Gupta, P. (2017) “Global Production Networks,” in K.A. Reinert (ed.), Handbook of Globalisation and Development, Elgar, 153-168.

Taglioni, D. and D. Winkler (2016) Making Global Value Chains Work for Development, World Bank.

World Trade Organization TiVA Statistics

WTO/OECD TiVA Database

Week 15: Review of Semester (May 1)

Week 15: Final Exam (May 8)

Some Policies

No texting in class unless it is an emergency.

Exams are not “open book” or “open notes.”

There is no “extra work” that can be done for “extra credit.”

Students are responsible for obtaining notes from other class members if they miss a class.

The GMU honor code will be enforced. To be more specific: If I can show that a student cheated on an exam, that student will fail the course.

It is my personal policy to not discriminate among students based on race, ethnicity, religious faith, national origin, gender, sexual orientation, or physical ability (see below).

Academic Accommodation for a Disability

If you are a student with a disability and you need academic accommodations, please see me and contact the Disability Resource Center (DRC) at 703-993-2474.  All academic accommodations must be arranged through the DRC.