ECONOMICS 756: INTERNATIONAL TRADE, II

Professor: Douglas Nelson
Office: 108 Tilton (Murphy Institute)
Phone: 865-5317

This course has two fundamental goals:

1) To develop an understanding of the intuition, theory and method underlying research on trade policy; and

2) To develop an overall picture of the body of research on international trade policy.

International Trade I (Econ 755) emphasized the development of general equilibrium tools for the analysis of international trade and their application to positive problems of the economics of international trade. The emphasis of that course was primarily theoretical. This semester we examine several important areas of current research on international trade: attempts to evaluate the aggregate welfare effects of international trade policy; theoretical and empirical work on the relationship between international trade and relative wages; theoretical and empirical work on the political economy of trade policy; and theoretical and empirical research on the relationships between international trade, trade policy, and growth.

Developments in research on trade policy have been intimately related to the development of virtually every branch of economics. Since we cannot hope to cover all the interesting and important branches of this important field, we will pursue the two goals with a dual strategy. We will cover a small number of topics in considerable depth, emphasizing the link (or lack thereof) between theory and empirical content in contemporary research on the topic. Every week the seminar will study (approximately) three papers in detail. Those papers will be presented and discussed by the members of the seminar. In addition to our detailed consideration of these topics, every student will be expected to prepare a research paper on some aspect of trade policy, broadly construed.

For several of this semester’s topics, we will draw on:

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

It is assumed that you have had graduate microeconomics (ECON 611) and international trade I (ECON 755). Standard sources you might want to keep handy are:

H. Varian (1984). Microeconomic Analysis. New York: Norton.

A. Dixit and V. Norman (1980). Theory of International Trade. Cambridge: Nisbet/Cambridge University Press. [Compact and clear. A masterly exposition of mainline trade theory. Useful to know also for its notation, which has become quite standard in trade theory.] (Dixit/Norman)

J. Bhagwati, A. Panagariya, and T.N. Srinivasan (1998). Lectures on International Trade. Cambridge: MIT Press [BPS]. [Excellent coverage of traditional and modern trade theory. Particularly good on developing theoretical intuition.]

K.Y. Wong (1995). International Trade in Goods and Factor Mobility. Cambridge: MIT Press. [An advanced text, similar coverage to BPS, less emphasis on intuition, more emphasis on technique, and a distinctive emphasis on factor mobility] (Wong)

A. Woodland (1982). International Trade and Resource Allocation. Amsterdam: North Holland. [My favorite graduate-level trade text. Builds all tools from scratch, with an emphasis on duality methods (like Dixit/Norman and Wong), with excellent exercises after each chapter. Unfortunately, now out of print.) [Woodland]

Additional texts on trade policy to which we will have occasional recourse are:

W.M. Corden (1997). Trade Policy and Economic Welfare. Oxford: Oxford University Press. [There is no better presentation of the general issues and approaches to modern research on trade policy] (Corden)

N. Vousden (1990). The Economics of Trade Protection. Cambridge: Cambridge University Press. [Especially useful for its presentation of current issues in trade policy research at a moderate technical level]

H. Bowen, A. Hollander, and J.-M. Viaene (1998). Applied International Trade Analysis. Ann Arbor: University of Michigan Press. [At about the same level as BPS, but with a stronger emphasis on applied work.] (BHV)

J. Bhagwati, ed. (1987). International Trade: Selected Readings. Cambridge: MIT Press. [A useful collection of classic and standard readings on international trade] (Bhagwati)

E. Helpman and P. Krugman (1985). Market Structure and Foreign Trade. Cambridge: MIT Press. [An excellent, synthetic treatment of theoretical research on the positive aspects of international trade under imperfect competition by two of the pioneers in the field.] (H&K, 1985)

E. Helpman and P. Krugman (1989). Trade Policy and Market Structure. Cambridge: MIT Press. [This book covers the normative theory associated with models of the sort developed in the previous book. While an easier read, this is also a considerably less satisfactory work.] (H&K, 1989)

G. Grossman, ed. (1992). Imperfect Competition and International Trade. Cambridge: MIT Press. [Excellent complement to the text treatments in the two Helpman/Krugman volumes.] (Grossman)

Some fairly extensive bibliographies of literatures covering many of the same topics that we will cover this term can be found at http://www.tulane.edu/~dnelson/BIBS/Bibs.htm. These are easiest to use in WordPerfect format, because you can use the outline feature.

Your performance in the course will be evaluated on the basis of: 1) active participation in the seminar (paper presentation and discussion); and 2) the preparation of a research paper.

1) With respect to seminar participation: I will expect all participants to have read (at least) all the assigned material (text and papers, whether they will be discussed or not) by the first class in which they are assigned. This is a necessary condition for intelligent participation and, thus, for a passing grade. A grade of “A” for this course requires a more active approach to the material involving discussion past the immediate content of the papers being presented. To that end, I strongly recommend reading beyond the required material on a regular basis.

2) With respect to the paper: To insure that everyone is on track for the paper I require a paper proposal to be submitted no later than the first class session in week 4. This must be typed and not more than two pages long. The paper itself is due in class on the last regularly scheduled class period. The paper must be original work, on a trade policy topic (though not necessarily on a topic we will cover in class). Plagiarism will not be tolerated. If you have any doubt about what plagiarism is, please see me before turning in your paper. There will be no second chances with respect to plagiarism. For those of you that are considering writing a dissertation in trade (or a field related to trade) I would strongly urge you to use this opportunity to identify the relevant theory and data some aspect of that work.

Short Syllabus: Economics 756

Topic I: Gains from Trade

Topic II: Economic Analysis of Trade Policy

Topic III: Optimal Policy under Factor Mobility

Topic IV: Oligopoly and Strategic Trade Policy

Topic V: Time, Information and Trade Activism

Topic VI: Political Economy of Trade Policy

Topic VII: Trade with Monopolistic Competition

Topic VIII: Geography, Agglomeration and Trade

Topic IX: Trade and Growth

Topic X: Trade and the Firm

Topic XI: Globalization of Production

Topic XII: Globalization and Labor Markets

Syllabus and Reading List: Econ 756

Topic I. Gains From Trade

● Basic Economics of Gains from Trade

*Dixit/Norman, Chapter 3, section 2

BPS, Chapter 18, sections 1-4.

Wong, Chapter 8, sections 1-4.

*A. Dixit (1985). “Tax Policy in Open Economies”. in A. Auerbach and M. Feldstein, Handbook of Public Economics (V.I). Amsterdam: North-Holland, pp. 313-374. Sections 1 and 2.

● Generalizing the CRS Case: Customs Unions and the Kemp-Wan Theorem (Alternative Topic)

M. Kemp and H. Wan (1976). “An Elementary Proposition Concerning the Formation of Customs Unions”. Journal of International Economics; V.6-#1, pp. 95-97. in Bhagwati.

M. Kemp and H. Wan (1993). The Welfare Economics of International Trade. Chur: Harwood. Part I.

Wong, Chapter 8, section 10

BPS, Chapter 31

R. Baldwin and A. Venables (1995). “Regional Economic Integration”. in G. Grossman and K. Rogoff, eds. Handbook of International Economics, V.III. Amsterdam: Elsevier, pp. 1597-1644.

● Implementing Gains from Trade with and without Lump-Sum Compensation (Alternative Topic)

BPS, Chapter 18, sections 5 and 6

*J.M. Grandmont and D. McFadden (1972). “A Technical Note on the Classical Gains from Trade”. Journal of International Economics; V.2-#2, pp. 109-125.

*A. Dixit and V. Norman (1980). “Gains from Trade: Commodity Taxes”. in Theory of International Trade. Oxford: Oxford University Press, pp. 79-80.

M. Kemp and H. Wan (1993). The Welfare Economics of International Trade. Chur: Harwood. Part II.

*P. Hammond and J. Sempere (1995). “Limits to the Potential Gains from Trade”. Economic Journal; V.105-#432, pp. 1180-1204

E. Grinols (1996). “Pure and Mixed Price and Income Compensation Schemes: Breaking Political Roadblocks to Trade Reform”. in R. Feenstra, G. Grossman and D. Irwin, eds. The Political Economy of Trade Policy. Cambridge: MIT, pp. 129-144.

*R. Guesnerie (2001). “Second Best Redistributive Policies: The Case of International Trade”. Journal of Public Economic Theory; V.3-#1, pp. 15-25.

*D. Spector (2001). “Is It Possible to Redistribute the Gains from Trade Using Income Taxation?”. Journal of International Economics; V.55-#2, pp. 441-460.

● Welfare Analytics under Variable Returns to Scale (Alternative topic)

Wong, Chapter 9, section 1

J. Markusen and J. Melvin (1984). “The Gains-from-Trade Theorem with Increasing Returns to Scale”. in H. Kierzkowski, ed. Monopolistic Competition and International Trade. Oxford: Oxford University Press, pp. 10-33.

M. Kemp and A. Schweinberger (1991). “Variable Returns to Scale, Non-Uniqueness of Equilibrium and the Gains from International Trade”. Review of Economic Studies; V.58-#4, pp. 807-816.

Topic II. Economic Analysis of Trade Policy

● The Economics of Protection: Applied Welfare Analysis

■ Some Useful Surveys on Trade and Protection

W.M. Corden (1975). “The Costs and Consequences of Protection: A Survey of Empirical Work”. in P. Kenen, ed. International Trade and Finance. New York: CUP, pp. 51-91.

W.M. Corden (1984). “The Normative Theory of International Trade”. in R. Jones and P. Kenen, eds. Handbook of International Economics, V.I. Amsterdam: North-Holland, pp. 63-130.

J. Anderson (1994). “The Theory of Protection”. in D. Greenaway and L.A. Winters, eds. Surveys in International Trade. Oxford: Blackwell, pp. 106-138.

R. Feenstra (1995). “Estimating the Effects of Trade Policy”. in G. Grossman and K. Rogoff, eds. Handbook of International Economics, V.III. Amsterdam: North-Holland, pp. 1553-1595.

S. Laird (1998). “Quantifying Commercial Policies”. in J. Francois and K. Reinert, eds. Applied Methods for Trade Policy Analysis: A Handbook. Cambridge: CUP, pp. 27-75.

■ Basic Applied Welfare Theory for Trade Policy

Woodland, Chapters 10 and 11

*BPS, Chapter 19

*B.N. Jeon and G. von Furstenberg (1986). “Techniques for Measuring the Welfare Effects of Protection: Appraising the Choices”. Journal of Policy Modeling; V.8-#2, pp. 273-303.

W. Martin (1998). “Measuring Welfare Changes with Distortions”. in J. Francois and K. Reinert, eds. Applied Methods for Trade Policy Analysis: A Handbook. Cambridge: CUP, pp. 76-93.

*J. Anderson and J.P. Neary (1996). “A New Approach to Evaluating Trade Policy”. Review of Economic Studies; V.63-#1, pp. 107-125.

J. Anderson (1995). “Tariff Index Theory”. Review of International Economics; V.3-#2, pp. 156-173.

*C. Bach and W. Martin (2001). “Would the Right Tariff Aggregator for Policy Analysis Please Stand Up?”. Journal of Policy Modeling; V.23-#6, pp. 621-635.

J.P. Neary and K. Roberts (1980). “The Theory of Household Behavior under Rationing”. European Economic Review; V.13-#1, pp. 25-42.

■ Implementing Trade Policy Analysis

○ Partial Equilibrium

D. Rousslang and J. Suomela (1985). Calculating the Consumer and Net Welfare Costs to the US of Import Relief. Washington, D.C.: US-ITC.

D. Rousslang and J. Suomela (1988) “Calculating the Welfare Costs of Import Restrictions in the Imperfect Substitutes Model”. Applied Economics; V.20-#5, pp. 691-700.

M. Jones (1993). “The Geometry of Protectionism in the Imperfect Substitutes Model: A Reminder”. Southern Economic Journal; V.60-#1, pp. 235-238.

D. Rousslang (1991). “Welfare Cost of Import Restraints in the Presence of Domestic Taxes”. Journal of Policy Modeling; V.13-#3, pp. 459-465.

*J. Francois and H.K. Hall (1996). “Partial Equilibrium Modelling”. in J. Francois and K. Reinert, eds. Applied Methods for Trade Policy Analysis: A Handbook. Cambridge: CUP, pp. 122-155.

*J. Anderson and J.P. Neary (1994). “The Trade Restrictiveness of the Multi-Fibre Arrangement”. World Bank Economic Review; V.8-#2, pp. 171-189.

S.P. Magee (1973). “The Welfare Effects of Restrictions on US Trade”. Brookings Papers on Economic Activity; #3, pp. 65-108.

D. Tarr and M. Morkre (1984). Aggregate Costs to the US of Tariffs and Quotas on Imports. Washington, D.C.: FTC.

*G. Hufbauer and K. Elliott (1994). Measuring the Costs of Protection in the US. Washington, D.C.: IIE. (Chapters 1 and 2)

○ General Equilibrium

– CGE Based Analysis

*K. Reinert and D. Roland-Holst (1996). “Social Accounting Matrices”. in J. Francois and K. Reinert, eds. Applied Methods for Trade Policy Analysis: A Handbook. Cambridge: CUP, pp. 94-121.

*S. Devarajan, D. Go, J. Lewis, S. Robinson, and P. Sinko (1996). “Simple General Equilibrium Modeling”. in J. Francois and K. Reinert, eds. Applied Methods for Trade Policy Analysis: A Handbook. Cambridge: CUP, 156-184.

*D. Roland-Holst, K. Reinert and C. Shiells (1994). “A General Equilibrium Analysis of North American Economic Integration”. in J. Francois and C. Shiells, eds. Modelling Trade Policy: Applied General Equilibrium Assessments of North American Free Trade. Cambridge: CUP, pp. 47-82.

J. Anderson and J.P. Neary (1994). “Measuring the Restrictiveness of Trade Policy”. World Bank Economic Review, V.8-#2, pp. 151-169.

J. Anderson (1998). “Trade Restrictiveness Benchmarks”. Economic Journal; V.108-#449, pp. 1111-1125.

*K. O’Rourke (1997). “Measuring Protection: A Cautionary Tale”. Journal of Development Economics; V.53-#1, pp. 169-183.

– Regression-based Analysis

*H. Wall (1999). “Using the Gravity Model to Estimate the Costs of Protection”. Federal Reserve Bank of St. Louis, Review; January/February, pp. 33-40.

*E. Leamer (1988). “Measures of Openness”. in R. Baldwin, ed. Trade Policy Issues and Empirical Analysis. Chicago: University of Chicago Press, pp. 147-204.

*H. Wolff (1993). “Trade Orientation: Measurement and Consequences”. Estudios de EconomÍa; V.20-#3, pp. 51-86. [esp. pp. 51-75.]

*L. Pritchett (1996). “Measuring Outward Orientation in LDCs: Can It Be Done?”. Journal of Development Economics; V.49-#2, pp. 307-335.

E. Leamer (1990). “The Structure and Effects of Tariff and Nontariff Barriers in 1983". in R. Jones and A. Krueger, eds. The Political Economy of International Trade. Oxford: Blackwell, pp. 224-260.

*J. Frankel, E. Stein, and S. Wei (1995). “Trading Blocs and the Americas: The Natural, the Unnatural, and the Super-Natural”. Journal of Development Economics; V.47-#1, pp. 61-95.

*J. Harrigan (1996). “Openness to Trade in Manufactures in the OECD”. Journal of International Economics; V.40-#1/2, pp. 23-39.

R. Lawrence (1987). “Imports in Japan: Closed Markets or Minds?”. Brookings Papers on Economic Analysis; V.1987-#2, pp. 517-554.

G. Saxonhouse (1989). “Product Differentiation, Economies of Scale and Access to the Japanese Market”. in R. Feenstra, ed. Trade Policies for International Competitiveness. Chicago: University of Chicago Press/NBER, pp. 145-174.

J. Harrigan and R. Vanjani (2003). “Is Japan’s Trade (Still) Different?”. Journal of the Japanese and International Economies; V.17-#4, pp. 507-519.

○ Intermediate Goods and Effective Rates of Protection (Alternative topic)

– Theory

BPS, Chapter 15

*W.M. Corden (1966). “The Structure of a Tariff System and the Effective Protective Rate”. Journal of Political Economy, V.74-#3, pp. 221-237.

*J. Bhagwati and T.N. Srinivasan (1973). “The General Equilibrium Theory of Effective Protection and Resource Allocation”. Journal of International Economics; V.3-#3, pp. 259-282. (Comment by Sendo (1974), Journal of International Economics, V.4-#2, pp. 213-215)

*Y. Uekawa (1979). “The Theory of Effective Protection, Resource Allocation and the Stolper-Samuelson Theorem: The Many Industry Case”. Journal of International Economics; V.9-#2, pp. 151-171.

J. Anderson (1998). “Effective Protection Redux”. Journal of International Economics; V.44-#1, pp. 21-44.

– Empirical Research

*D. Greenaway (1988). “Effective Tariff Protection in the UK”. Oxford Bulletin of Economics and Statistics; V.50-#?, pp. 313-324.

*C. Ennew, D. Greenaway, and G. Reed (1990). “Further Evidence on Effective Tariffs and Effective Protection in the UK”. Oxford Bulletin of Economics and Statistics; V.52-#1, pp. 69-78.

■ Voluntary Export Restraints

○ Effects on Importers

T. Murray, W. Schmidt and I. Walter (1978). “Alternative Forms of Protection against Market Disruption”. Kyklos; V.31-#4, pp. 624-637.

B. Hindley (1980). “Voluntary Export Restraints and Article XIX of the GATT”. in J. Black and B. Hindley, eds. Current Issues in Commercial Policy and Diplomacy; New York: St. Martins, pp. 52-72.

B. Hindley (198?). “Voluntary Export Restrains and the GATT’s Main Escape Clause”. World Economy, V.??-#?, pp. 313-341.

C. Turner (1983). “Voluntary Export Restraints on Trade Going to the United States”. Southern Economic Journal; V.49-#3, pp. 793-803.

B.J. Liu (1986). “On Voluntary Export Restraints”. Economic Essays; V.15-#1, pp. 45-62.

C. Hamilton (1985). “Voluntary Export Restraints and Trade Diversion”. Journal of Common Market Studies; V.23-#4, pp. 345-355.

F. Dei (1985). “Voluntary Export Restraints and Foreign Investment”. Journal of International Economics; V.19-#3/4, pp. 305-312.

K. Krishna (1989). “What do VERs Do?”. in R. Sato and J. Nelson, eds. Beyond Trade Friction: Japan-US Economic Relations. Cambridge: CUP, pp. 76-92.

○ Effects on Exporters

C. Hamilton (1986). “Import Quotas and Voluntary Export Restraints: Focusing on Exporting Countries”. in. C. Findlay and R. Garnaut, eds. The Political Economy of Manufacturing Sector Protection in ASEAN and Australia; Sydney: Allen and Unwin, pp. 214-234.

C. Hamilton (1986). “ASEAN Systems for Allocation of Export Licenses under VERs”. in. C. Findlay and R. Garnaut, eds. The Political Economy of Manufacturing Sector Protection in ASEAN and Australia; Sydney: Allen and Unwin, pp. 235-247.

C. Hamilton (1986). “An Assessment of Voluntary Export Restraints on Hong Kong Exports to Europe and the US”. Economica; V.53-#211, pp. 159-178.

C. Hamilton (1988). “Restrictiveness and International Transmission of the ‘New’ Protectionism”. in R. Baldwin, C. Hamilton and A. Sapir, eds. Issues in US-EC Trade Relations. Chicago: University of Chicago Press, pp. 199-224.

T. Bark and J. deMelo (1988). “Export Quota Allocations, Export Earnings, and Market Diversification”. World Bank Economic Review; V.2-#3, pp. 341-348.

T. Bark and J. deMelo (1989). “Efficiency and Export Earnings Implications of Two-Tier Quota Allocation Rules”. International Economic Journal; V.3-#3, pp. 31-42.

J. de Melo and L.A. Winters (1990). “Voluntary Export Restraints and Resource Allocation in Exporting Countries”. World Bank Economic Review; V.4-#2, pp. 209-233.

I. Trela and J. Whalley (1995). “Internal Quota-Allocation Schemes and the Costs of the MFA”. Review of International Economics; V.3-#3, pp. 284-306.

○ The Multi-Fibre Arrangement

D. Greenaway (1986). “Estimating the Welfare Affects of Voluntary Export Restraints and Tariffs: An Application to Non-Leather Footwear in the UK. Applied Economics; V.18-#?, pp. 1065-1083.

R. Erzan, J. Goto and P. Holmes (1990). “Effects of the Multi-Fibre Arrangement on Developing Countries’ Trade: An Empirical Investigation”. in C. Hamilton, ed. Textiles Trade and the Developing Countries. Washington, DC: The World Bank.

I. Trela and J. Whalley (1990). “Global Effects of Developed Country Trade Restrictions in Textiles and Apparel”. Economic Journal; V.100-#403, pp. 1190-1205.

K. Krishna and L.H. Tan (1994). “On the Importance of Rent Sharing in the Multi-Fibre Arrangement: Evidence from US-Hong Kong Trade in Textiles”. in A. Deardorff and R. Stern, eds. Analytical and Negotiating Issues in the Global Trading System. Ann Arbor: University of Michigan Press, pp. 95-131.

K. Krishna, R. Erzan and L.H. Tan (1994). “Rent Sharing in the Multi-Fibre Arrangement: Theory and Evidence from US Apparel Imports from Hong Kong”. Review of International Economics; V.2-#1, pp. 62-73.

K. Krishna, W. Martin, and L.H. Tan (1997). “Imputing License Prices: The Limitations of a Cost-Based Approach”. Journal of Development Economics; V.52-#2, pp. 355-374.

K. Krishna and L.H. Tan (1998). Rags and Riches: Implementing Apparel Quotas under the Multi-Fibre Arrangement. Ann Arbor: University of Michigan Press.

*J. Anderson and J.P. Neary (1994). “The Trade Restrictiveness of the Multi-Fibre Arrangement”. World Bank Economic Review; V.8-#2, pp. 171-189.

● Distortions and Policy Targeting

■ Basic Theory

*BPS, Chapters 17 and 20.

BPS, Chapters 22-28.

Wong, Chapter 11, sections 1-5

*A. Dixit (1985). “Tax Policy in Open Economies”. in A. Auerbach and M. Feldstein, Handbook of Public Economics (V.I). Amsterdam: North-Holland, pp. 313-374. Sections 2 and 3.

*H.G. Johnson (1965). “Optimal Trade Intervention in the Presence of Domestic Distortion”. R. Caves, et al. Trade, Growth and the Balance of Payments. also in Bhagwati.

*J. Bhagwati (1971). “The Generalized Theory of Distortions and Welfare”. J. Bhagwati, et al. Trade, Balance of Payments and Growth; also in Bhagwati.

T.N. Srinivasan (1996). “The Generalized Theory of Distortions and Welfare Two Decades Later”. in R. Feenstra, G. Grossman, and D. Irwin, eds. The Political Economy of Trade Policy. Cambridge: MIT Press, pp. 3-25.

*J. Anderson, G. Bannister and J.P. Neary (1995). “Domestic Distortions and International Trade”. International Economic Review; V.36-#1, pp. 139-157.

*P. Krishna and A. Panagariya (2000). “A Unification of the Theory of Second Best”. Journal of International Economics; V.52-#2, pp. 235-257.

■ The Infant Industry Argument: An Example

Corden, Chapter 9

M. Kemp (1960). “The Mill-Bastable Infant-Industry Dogma”. Journal of Political Economy. V.68-#1, pp. 65-67.

*M. Kemp (1974). “Learning by Doing: Formal Tests for Intervention in an Open Economy”. Keio Economic Studies. V.11-#1, pp. 1-7.

*R. Baldwin (1969). “The Case Against Infant-Industry Protection”.Journal of Political Economy. V.77-#2, pp. 295-305.

*A. Krueger and B. Tuncer (1982). “An Empirical Test of the Infant-Industry Argument”. American Economic Review. V.72-#5, pp. 1142-1152.

R.E.B. Lucas (1984). “An Empirical Test of the Infant Industry Argument: Comment”. American Economic Review; V.74-#5, pp. 1110-11. [reply]

*A. Harrison (1994). “An Empirical Test of the Infant Industry Argument: Comment”. American Economic Review; V.84-#4, pp. 1090-95. [reply follows, pp. 1096]

L. Westphal (1982). “Fostering Technological Mastery by Means of Selective Infant-Industry Protection”. in M. Syrquin and S. Teitel, Trade, Stability, Technology and Equity in Latin America. New York: Academic Press, pp. 255-279.

M. Bell, B. Ross-Larson, and L. Westphal (1984). “Assessing the Performance of Infant Industries”. Journal of Development Economics; V.16-#?, pp. 101-128.

■ Tariffs, Optimal and Otherwise: Another Example (Alternative)

BPS, Chapter 21

*A. Dixit (1985). “Tax Policy in Open Economies”. in A. Auerbach and M. Feldstein, Handbook of Public Economics (V.I). Amsterdam: North-Holland, pp. 313-374. Sections 3 and 5.

*R. Jones (1969). “Tariffs and Trade in General Equilibrium”. American Economic Review. V.59-#3, pp. 418-423.

*E. Bond (1990). “The Optimum Tariff Structure in Higher Dimensions”.International Economic Review; V.31-#1, pp. 103-116.

J.P. Neary (1993). “Welfare Effects of Tariffs and Investment Taxes”. in W. Ethier, E. Helpman and J.P. Neary, eds. Theory, Policy and Dynamics in International Trade. New York: Cambridge University Press. pp. 131-156

■ Immiserizing Growth: Another Example (Alternative)

BPS, Chapter 29.

Wong, Chapter 10, Section 6

*J. Bhagwati (1958). “Immiserizing Growth: A Geometrical Note”. Review of Economic Studies; V.25-#3, pp. 201-205. [in Caves and Johnson]

*H.G. Johnson (1967). “The Possibility of Income Loss from Increased Efficiency or Factor Accumulation in the Presence of Tariffs”. Economic Journal; V.77-#305, pp. 151-154. [in Bhagwati]

R. Brecher and C. DÍaz-Alejandro (1977). “Tariffs, Foreign Capital and Immiserizing Growth”. Journal of International Economics; V.7-#4, pp. 317-322. [in Bhagwati]

● Incremental Policy Reform (Alternative)

BPS, Chapter 35

*A. Dixit (1985). “Tax Policy in Open Economies”. in A. Auerbach and M. Feldstein, Handbook of Public Economics (V.I). Amsterdam: North-Holland, pp. 313-374. Section 4.

*W. Diewert, A. Turunen-Red and A. Woodland (1989). “Productivity- and Pareto-Improving Changes in Taxes and Tariffs”. Review of Economic Studies; V.56-#2, pp. 199-216.

*J. Anderson and J.P. Neary (1992). “Trade Reform with Quotas, Partial Rent Retention and Tariffs”. Econometrica; V.60-#1, pp. 57-76.

J. Anderson (2002). “Trade Reform Diagnostics with Many Households, Quotas and Tariffs”. Review of International Economics; V.10-#2, pp. 215-236.

P. Neary (1998). “Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs and Subsidies to High Technology Industries”. Scandinavian Journal of Economics; V.100-#1, pp. 187-206.

J. Ju and K. Krishna (2000). “Welfare and Market Access Effects of Piecemeal Tariff Reform”. Journal of International Economics; V.51-#2, pp. 305-316.

*J. Anderson and P. Neary (2006). “Welfare versus Market Access: The Implications of Tariff Structure for Tariff Reform”. Journal of International Economics; forthcoming.

Topic III. Optimal Policy under International Factor Mobility

● The Basic Analytics of International Factor Mobility--The Mundell Model and Beyond

■ Characrterization and Directions of Trade

BPS, Chapter 32

Wong, Chapter 4

R. Ruffin (1984). “International Factor Movements”. in R. Jones and P. Kenen, eds. Handbook of International Economics--Vol. I. Amsterdam: North-Holland, pp. 237-288.

*R. Mundell (1957) “International Trade and Factor Mobility”, American Economic Review, V.47-#3, pp. 321-335.

M. Kemp (1966). “The Gain from International Trade and Investment: A Neo-Heckscher-Ohlin Approach”. American Economic Review, V.56-#4, pp.788-809.

R. Jones (1967). “International Capital Movements and the Theory of Tariffs and Trade”.  Quarterly Journal of Economics, V.81-#1, pp. 1-38. (Comment by Inada/Kemp (1969) Quarterly Journal of Economics; V.83-#3, pp. 524-528)

J. Chipman (1971). “International Trade with Capital Mobility: A Substitution Theorem”. in J. Bhagwati, et al. eds. Trade, Balance of Payments and Growth. Amsterdam: North-Holland, pp. 201-237.

*W. Ethier and S. Ross (1971). “International Capital Movements and Long-Run Diversification”. Journal of International Economics; V.1-#3, pp. 301-314.

Y. Uekawa (1972). “On the Existence of Incomplete Specialization in International Trade with Capital Mobility”. Journal of International Economics; V.2-#1, pp. 1-23.

*R. Jones and R. Ruffin (1975). “Trade Patterns with Capital Mobility”. in M. Parking and A.R. Nobay, eds. Current Economic Problems. Cambridge: Cambridge University Press, pp. 307-332.

*J.P. Neary (1985). “International Factor Mobility, Minimum Wage Rates, and Factor Price Equalization: A Synthesis”. Quarterly Journal of Economics; V.100-#3, pp. 551-570.

L. Svensson (1984). “Factor Trade and Goods Trade”. Journal of International Economics; V.16-#3/4, pp. 365-378.

J. Markusen and L. Svensson (1985). “Trade in Goods and Factors with International Differences in Technology”. International Economic Review; V.26-#1, pp. 175-192.

M. Ohyama (1989). “Factor Endowments and the Pattern of Commodity and Factor Trade”. Keio Economic Studies; V.26-#1, pp. 19-29.

*W. Ethier and L. Svensson (1986). “The Theorems of International Trade with Capital Mobility”. Journal of International Economics; V.20-#1/2, pp. 21-42.

*R. Falvey and U. Kreickemeier (2005). “Globalisation and Factor Returns in Competitive Markets”. Journal of International Economics; V.66-#1, pp. 233-248.

K.Y. Wong (1988). “International Factor Mobility and the Volume of Trade: An Empirical Study”. in R. Feenstra, ed. Empirical Methods for International Trade. Chicago: University of Chicago Press/NBER, pp. 231-250.

A. Wood (1994). “Give Heckscher-Ohlin A Chance!”. Weltwirtschaftliches Archiv; V.130-#1, pp. 20-49.

J. Gaisford (1995). “International Capital Mobility, The Factor Content of Trade and Leontief Paradoxes”. Journal of International Economics; V.39-#1/2, pp. 175-183.

■ Trade and Factor Mobility: Complements or Substitutes

J. Markusen (1983). “Factor Movements and Commodity Trade as Complements”. Journal of International Economics; V.14-#3/4, pp. 341-356.

K.Y. Wong (1986). “Are International Trade and Factor Mobility Substitutes?”. Journal of International Economics; V.21-#1/2, pp. 25-43.

V. Norman and A. Venables (1995). “International Trade, Factor Mobility, and Trade Costs”. Economic Journal; V.105-#433, pp. 1488-1504.

● Optimal Policy with Factor Mobility

G.D.A. McDougall (1960), “The Benefits and Costs of Private Investment From Abroad”, Bulletin of the Oxford University Institute of Statistics, V.22-#3, pp. 189-211.

M. Kemp (1962). “Foreign Investment and the National Advantage”. Economic Record, V.38-#?, pp. 56-62.

J. Chipman (1972). “The Theory of Exploitative Trade and Investment Policies: A Reformulation and Synthesis”. in L. DiMarco, ed. International Economics and Development. New York: Academic Press, pp. 209-244.

R. Brecher (1983). “Second-Best Policy for International Trade and Investment”. Journal of International Economics; V.14-#3/4, pp. 313-320.

S.P. Das (1986). “Optimal Taxation of Foreign Capital when Its Movements are Sluggish”. Journal of International Economics; V.21-#3/4, pp. 351-360.

E. Grinols (1986). “Foreign Investment and Economic Growth: Characterization of a Second-Best Policy for Welfare Gains”. Journal of International Economics; V.21-#1/2, pp. 165-171.

E. Bond (1991). “Optimal Tax and Tariff Policies with Tax Credits”. Journal of International Economics; V.30-#3/4, pp. 317-329.

J.P. Neary (1993). “Welfare Effects of Tariffs and Investment Taxes”. in W. Ethier, E. Helpman and J.P. Neary, eds. Theory, Policy and Dynamics in International Trade. Cambridge: CUP, pp. 131-156.

● Optimal Policy with Commodity and Factor Mobility: The Ramaswami Proposition

V.K. Ramaswami (1968). “International Factor Movement and the National Advantage”. Economica; V.35-#139, pp. 309-310. (Comment by Webb and Response, (1970) Economica, V.37-#?, pp. 81-85)

J. Bhagwati (1979). “International Factor Movements and National Advantage”. Indian Economic Review; V.14-#2, pp. 73-100.

K.Y. Wong (1983). “On Choosing Among Trade in Goods and International Capital and Labor Mobility”. Journal of International Economics; V.14-#3/4, pp. 223-250.

R. Jones and S. Easton (1990). “Foreign Investment and International Migration: Analytics and Extensions of the Basic Model”. Keio Economic Studies; V.27-#1, pp. 1-20.

R. Brecher and E. Choudhri (1987). “International Migration versus Foreign Investment in the Presence of Unemployment”. Journal of International Economics; V.23-#3/4, pp.329-342.

W. Ethier (1987). “Bundled International Factor Mobility”. In H. Kierzkowski, ed. Protection and Competition in International Trade. Oxford: Blackwell, pp. 99-111.

L. Cheng and K.Y. Wong (1990). “On the Strategic Choice Between Capital and Labor Mobility”. Journal of International Economics; V.28-#3/4, pp. 291-314.

Topic IV. Oligopoly and Strategic Trade Policy

● Domestic Market Power

Corden, Chapter 8

*A.A. Auquier and R. Caves (1979), “Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy”, Economic Journal. V.89-#355; pp. 559-581.

*H. Katrak (1980). “Multinational Monopolies and Monopoly Regulation”.Oxford Economic Papers; V.32-#3, pp. 453-466.

*S. Donnenfeld (198?). “Domestic Regulation and the Preservation of Monopoly Power in Foreign Markets”. Southern Economic Journal; V.??-#?, pp. 954-965.

● Foreign Market Power

*H&K (1989), Chapter 4

J. Brander and B. Spencer (1981). “Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry”. Canadian Journal of Economics; V.14-#3, pp. 371-389. (Bhagwati)

*J. Brander and B. Spencer (1984), “Trade Warfare: Tariffs and Cartels”, Journal of International Economics. V.16-#3/4; pp. 227-242.

*R. Jones and S. Takemori (1989). “Foreign Monopoly and Optimal Tariffs for the Small Open Economy”. European Economic Review; V.33-#9, pp. 1691-1707.

K. Krishna (1991). “Making Altruism Pay in Auction Quotas”. in E. Helpman and A. Razin, eds. International Trade and Trade Policy. Cambridge: MIT Press, pp. 46-65.

● Trade Patterns with Oligopolistic Competition

*H&K (1985), Chapter 5

*J. Markusen (1981). “Trade and the Gains from Trade with Imperfect Competition”. Journal of International Economics; V.11-#4, pp. 531-551. (Grossman)

*J. Brander and P. Krugman (1983). “A ‘Reciprocal Dumping’ Model of International Trade”. Journal of International Economics; V.15-#3/4, pp. 313-321. (Grossman)

● Trade Policy for Rent-Shifting with Cournot Competition

■ Basic Analysis

*H&K (1989), Chapter 5

BPS, Chapter 30

*J. Brander and B. Spencer (1985), “Export Subsidies and International Market Share Rivalry”, Journal of International Economics. V.18-#1/2; pp. 83-100.

*J. Brander and B. Spencer (1984). “Tariff Protection and Imperfect Competition”. in H. Kierzkowski, ed. Monopolistic Competition and International Trade. Oxford: OUP, pp. (Grossman)

A. Dixit (1984). “International Trade Policies for Oligopolistic Industries”.Economic Journal; V.94-#supplement, pp. 1-16. (Bhagwati)

*J. Markusen and A. Venables (1988). “Trade Policy with Increasing Returns and Imperfect Competition: Contradictory Results from Competing Assumptions”. Journal of International Economics; V.24-#3/4, pp. 299-316. (Grossman)

A. Dixit and G. Grossman (1986). “Targeted Export Promotion With Several Oligpolistic Industries”, Journal of International Economics. V.21-#3/4; pp. 233-249.

■ Alternative Behavioral Assumptions

J. Bulow, J. Genakoplos and P. Klemperer (1985). “Multimarket Oligopoly: Strategic Substitutes and Strategic Complements”. Journal of Political Economy; V.93-#3, pp. 488-511.

*J. Eaton and G. Grossman (1986), “Optimal Trade and Industrial Policy Under Oligopoly”. Quarterly Journal of Economics. V.101-#2; pp. 383-406. (Grossman and Bhagwati)

L. Cheng (1988), “Assisting Domestic Industries under International Oligopoly: The Relevance of the Nature of Competition to Optimal Policies”.American Economic Review; V.78-#4; pp. 746-758.

K. Krishna and M. Thursby (1991). “Optimal Policies with Strategic Distortions”. Journal of International Economics; V.31-#3/4, pp. 291-308.

*D. Laussel (1992). “Strategic Commercial Policy Revisited: A Supply-Function Equilibrium Model”. American Economic Review; V.82-#1, pp. 84-99.

D. deMeza (1989). “Not Even Strategic Trade Theory Justifies Export Subsidies”. Oxford Economic Papers; V.41-#?, pp. 720-736.

*S. Ben-Zvi and E. Helpman (1992). “Oligopoly in Segmented Markets”. (Grossman)

■ Evaluating Trade Policy in An Oligopolistic Industry, The Case of Automobiles

A. Dixit (1988). “Optimal Trade and Industrial Policies for the U.S. Automobile Industry”. in R. Feenstra, ed. Empirical Methods for International Trade. Cambridge: MIT Press, pp. 141-165. Also in Grossman.

K. Krishna, K. Hogan, and P. Swagel (1994). “The Non-Optimality of Optimal Trade Policies: The US Automobile Industry Revisited, 1979-1985". in P. Krugman and A. Smith, eds. Empirical Studies of Strategic Trade Policy. Chicago: University of Chicago Press/NBER, pp. 11-37.

P. Goldberg (1995). “Product differentiation and Oligopoly in International Markets: The Case of the US Automobile Industry”. Econometrica; V.63-#4, pp. 891-952.

S. Berry, J. Levinsohn, and A. Pakes (1995). “Automobile Prices in Market Equilibrium”. Econometrica; V.63-#4, pp. 841-890.

*S. Berry, J. Levinsohn, and A. Pakes (1999). “Voluntary Export Restraints in Automobiles: Evaluating a Trade Policy”. American Economic Review; V.89-#3, pp. 400-430.

J. Ries (1995). “Windfall Profits and Vertical Relationships: Who Gained in the Japanese Auto Industry from VERs?”. Journal of Industrial Economics; V.41-#3, pp. 259-76

M. Fuss, S. Murphy and L. Waverman (1992). “The State of North American and Japanese Motor Vehicle Industries: A Partially Calibrated Model to Examine the Impacts of Trade Policy Changes”. NBER Working Paper; #4225.

deMelo, J. and D. Tarr (1996). “VERs Under Imperfect Competition and Foreign Direct Investment: A Case Study of the US-Japan Auto VER”. Japan and the World Economy; V.8-1, pp. 11-33.

■ International R&D and Trade Policy

*B. Spencer and J. Brander (1983). “International R&D Rivalry and Industrial Strategy”. Review of Economic Studies; V.50-#4, pp. 707-722.

L. Cheng (1984). “International Competition in R&D and Technological Leadership”. Journal of International Economics; V.17-#1/2, pp. 15-40.

L. Cheng (1987). “Optimal Trade and Technology Policies: Dynamic Linkages”. International Economic Review; V.28-#3, pp. 757-776.

A. Dixit (1988). “International R&D Competition and Policy”.  in A.M. Spence and H.A. Hazard, eds. International Competitiveness. Cambridge: Ballinger, pp. 149-171.

J. Reitzes (1991). “The Impact of Quotas and Tariffs on Strategic R&D Behavior”. International Economic Review; V.32-#4, pp. 985-1007.

K. Bagwell and R. Staiger (1992). “The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly”. International Economic Review; V.33-#4, pp. 795-816.

*K. Bagwell and R. Staiger (1994). “The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries”. Journal of International Economics; V.36-#1/2, pp. 133-150.

*K. Miyagiwa and Y. Ohno (1997). “Strategic R&D Policy and Appropriability”. Journal of International Economics; V.42-#1/2, pp. 125-148.

K. Miyagiwa and Y. Ohno (1995). “