Dr. Neil Bjorksten
Winter, 1994
Department of Economics

"No nation was ever ruined by trade."
Benjamin Franklin
Course Description

This five week mini-course on international trade is designed with two purposes in mind: to familiarize you with the theoretical models and results that underlie recent analysis of the flow of commodities across borders, and to prepare you for empirical work on international trade topics in the third term and over the course of your future career.

International trade theory is largely an application of the microeconomic theory that you have already learned. The basic models of exchange of goods across borders are extremely well developed and have their foundations in general equilibrium analysis. For better or worse, these assume perfectly competitive markets. In recent years, much has been written on trade with imperfect competition; here, tools of industrial organization are applied to explain observed trade patterns that cannot be explained with traditional models.

In the coming five weeks, we will systematically cover both types of analyses and spend some time looking at their empirical applications.

International Economics by Krugman and Obstfeld
International Trade by Richard Pomfret

Supplementary readings will also be assigned from time to time.

Topics to be covered:
1. Comparative advantage and the Ricardian model
2. Relative factor endowments and the Heckscher-Ohlin model
3. Trade policy tools and the political economy of protectionism
4. Empirical models of trade, applications to economies in transition
5. Imperfect competition and strategic trade policy

There will be a medium-length (10-15 page) research paper due Friday, February 4.

The research paper will count for 30% of the grade
The final exam will count for 70% of the grade.

In addition, there may be unannounced 5 minute quizzes at any lecture. These quizzes will always cover material from the previous lecture. Quiz scores will only be used to determine borderline cases when final grades are assigned; they may affect a grade positively or negatively.

CRC-Curriculum Resource Center
CEU Budapest, Hungary
Modified: May, 1996


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