ECONOMICS 755


INTERNATIONAL TRADE THEORY, I



Professor: Douglas Nelson

Office: 108 Tilton Hall

Office Hours: TR 4:00-5:30, and by appointment

Phone: 865-5317


This course has two fundamental goals:

 

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

 

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


Research on international trade is as old as the systematic study of economics. Footnote Developments in research on international trade 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. First, we will seek to develop a solid foundation in the neoclassical, competitive model of general equilibrium as applied to international trade. Within this framework, we will consider three canonical models of competitive general economic equilibrium: the classical ("Ricardian") model, the specific-factors ("Ricardo-Viner") model, and the factor endowment ("Heckscher-Ohlin") model. Second, we will study a number of research papers on central questions in modern trade research.


It is assumed that you have a working knowledge of linear algebra and multivariate calculus, especially as applied to optimization problems; and have had graduate microeconomics (ECON 751 and 752). Standard sources you might want to keep handy are:

 

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

 

E. Silberberg (1990). The Structure of Economics. New York: McGraw Hill Silberberg


In addition to readings from current research on international trade, we will be referring to the following texts:

 

A. Dixit and V. Norman (1980). Theory of International Trade. Cambridge: Nisbet/Cambridge University Press. Dixit/Norman

 

A. Woodland (1982). International Trade and Resource Allocation. Amsterdam: North Holland. Woodland

 

E. Leamer (1984). Sources of International Comparative Advantage. Cambridge: MIT Press. [Best, and most complete, account I know of on how to do good quality empirical research on a question of economics]. Leamer.

 

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


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

 

R. Caves, J. Frankel and R. Jones (1990). World Trade and Payments: An Introduction. New York: Harper Collins. [Sophisticated undergraduate text. An excellent source for keeping track of the intuition on topics covered in this course] CFJ

 

J. Markusen and J. Melvin (1988). The Theory of International Trade. New York: Harper and Row. [Another useful, non-technical, reference]. Markusen/Melvin

 

J. Bhagwati and T.N. Srinivasan (1983). Lectures on International Trade. Cambridge: MIT Press. [An advanced text with an especially good coverage of the Bhagwati-Johnson theory of economic policy]

 

R. Jones and P. Kenen, eds. (1984). Handbook of International Economics, Volume 1. Amsterdam: North-Holland. [Indispensable source of survey articles on core topics in trade research].

 

G. Grossman and K. Rogoff, eds. (1995). Handbook of International Economics, Volume III. Amsterdam: North-Holland. [Continuing in the tradition of the previous volume]

 

D. Greenaway and L.A. Winters, eds. (1994). Surveys in International Trade. Oxford: Blackwell.


Your performance in the course will be evaluated on the basis of: 1) active participation in the seminar (paper presentation and discussion); 2) Homework; and 3) 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: You will be expected to replicate, and possibly extend, a published piece of empirical work based on competitive, general equilibrium trade theory. To this end I have prepared a bibliography of papers of this sort. To insure that everyone is on track for the paper I require that everyone select a paper for replication no later than the first class session in week 4. You must check the paper you have selected with me and there can be no duplication of replications by members of the class. At a minimum your paper must contain a coherent discussion of the hypothesis you are testing and explicit derivations of any results that are not explicitly presented in the paper whose results you are replicating. You must discuss the tests you performed (including the particular software you used) and any diagnostics/extensions you perform. And you must present an explicit comparison of your results with those in the paper you are replicating. Finally, you must provide a full copy of your data set on a disk. The paper itself is due in class on the last regularly scheduled class period. Late papers will be penalized one full letter grade.


Economics 755

Syllabus and Reading List


Topic I. Themes of International Trade Theory

 

■ Required:


                                    Dixit/Norman, Chapter 1


                                    Woodland, Chapter 1

 

■ Supplementary

 

W. Ethier (1987). "The Theory of International Trade". in L. Officer, ed. International Economics. Boston: Kluwer, pp. 1-57.

 

R. Falvey (1994). “The Theory of International Trade”. In D. Greenaway and L.A. Winters, ed. Surveys in International Trade. Oxford: Blackwell, pp. 9-42.

 

B. Hamminga (1983). Neoclassical Theory Structure and Theory Development: An Emprirical-Philosophical Case Study Concerning the Theory of International Trade. Berlin: Springer-Verlag.


Topic II. Topic 2: Introduction to Dual Methods: Production and Cost Functions

 

■ Required:

 

Woodland, Chapter 2

 

■ Supplementary

 

Silberberg, Chapter 7: "The Envelope Theorem and Duality"

 

A. Dixit, Chapter 5: "Maximum Value Functions". Optimization and Economic Theory. New York: Oxford University Press.


Topic III. The Production Sector

 

● Constant Returns to Scale

 

■ Required:


                                    Woodland, Chapter 3

 

Dixit/Norman, Chapter 2 and appendix

 

Silberberg, Chapter 16: "General Equilibrium, II: Nonlinear Models"

 

M. Mussa (1979). "The Two Sector Model in Terms of its Dual: A Geometric Exposition". Journal of International Economics; V.9-#4, pp. 513-526. in Bhagwati.

 

■ Supplementary

 

Markusen/Melvin, Chapter 2: "The Production Possibility Curve".

 

R. Jones (1965). "The Structure of Simple General Equilibrium Models". Journal of Political Economy; V.73-#6, pp. 557-572.

 

R. Jones (1965). "Duality in International Trade: A Geometric Note". Canadian Journal of Economics; V.31-#3, pp. 390-393.

 

A. Woodland (1977). "A Dual Approach to Equilibrium in the Production Sector in International Trade Theory". Canadian Journal of Economics; V.10-#1, pp. 50-68.

 

M. Kemp, ed. (1982). Production Sets. Academic Press.

 

● Comparative Static Analysis of the Production Sector

 

■ Required


                                    Woodland, Chapter 4


                                    Dixit/Norman, Chapter 5

 

R. Jones and J. Schienkman (1977). "The Relevance of the Two-Sector Production Model in Trade Theory". Journal of Political Economy; V.85-#?, pp. 909-935.

 

R. Jones and S. Easton (1983). “Factor Intensities and Factor Substitution in General Equilibrium”. Journal of International Economics; V.15-#1/2, pp. 65-99.

 

E. Leamer (1987). “Paths of Development in the Three-Factor, n-Good General Equilibrium Model”. Journal of Political Economy; V.95-#5, pp. 961-999.

 

■ Required: Empirical

 

-E. Leamer (1993). “Wage Effects of a US-Mexican Free Trade Agreement”. In P. Garber, ed. The Mexico-US Free Trade Agreement. Cambridge: MIT, pp. 57-125

 

-R. Lawrence and M. Slaughter (1993). “Trade and US Wages: Giant Sucking Sound or Small Hiccup?”. BPEA; V.1993-#2, pp. 161-210.

 

-E. Leamer (1994). “Trade, Wages, and Revolving Door Ideas”. NBER Working Paper, #4716.

 

■ Supplementary--General

 

A. Takayama (1982). "On Theorems of General Competitive Equilibrium of Production and Trade--A Survey of Some Recent Developments in the Theory of International Trade". Keio Economic Studies; V.19-#?, pp. 1-37.

 

H. Thompson (1987). "A Review of Advancements in the General Equilibrium Theory of Production and Trade". Keio Economic Studies; V.24-#?, pp. 43-62.

 

■ Supplementary--Factor-Price Equalization

 

P. Samuelson (1948). "International Trade and the Equalization of Factor-Prices". Economic Journal; V.58-#?, pp. 163-184.

 

P. Samuelson (1949). "International FPE Once Again". Economic Journal; V.59-#234, pp. 181-197.

 

A. Lerner (1952). "Factor-Prices in International Trade". Economica; V.19-#73, pp. 1-15. (Comment by Pearce on pp. 16-18)

 

H.G. Johnson (1957). "Factor Endowments, International Trade and Factor Prices". Manchester School; V.25-#3, pp. 270-283.

 

A.H. Land (1959). "Factor Endowments and Factor Prices". Economica; V.26-#?, pp. 137-142. (mathematical appendix by H. Kuhn, pp. 142-144).

 

W.P. Travis (1964). "The Equalization Region". Chapter 1 of The Theory of Trade and Protection. Cambridge: Harvard, pp. 1-38.

 

P. Samuelson (1953). "Prices of Factors and Goods in General Equilibrium". Review of Economic Studies; V.21-#54, pp. 1-20.

 

D. Gale and H. Nikaido (1965). "The Jacobian Matrix and the Global Univalence of Mappings". Mathematische Annalen, V.159-#2, pp. 81-93.

 

P. Samuelson (1967). "Summary on FPE". International Economic Review; V.8-#3, pp. 286-295.

 

H. Wu (1987). "The Equalization of Factor Prices in General Equilibrium when Commodities Outnumber Factors". Journal of International Economics; V.23-#3/4, pp. 343-356.

 

C. Blackorby, W. Schworm and A. Venables (1993). "Necessary and Sufficient Conditions for FPE". Review of Economic Studies; V.60-#2, pp. 413-434.

 

■ Supplementary: Stolper-Samuelson

 

R. Jones (1993). "Reflections on the Stolper-Samuelson Theorem". in H. Herberg and N.V. Long, eds., Trade, Welfare and Economic Policies. Ann Arbor: University of Michigan Press, pp. 21-36.

 

W. Stolper and P. Samuelson (1941). "Protection and Real Wages". Review of Economic Studies; V.9-#1, pp. 58-73.

 

R. Jones and S. Marjit (1991). "The Stolper-Samuelson Theorem, the Leamer Triangle and the Produced Mobile Factor Structure". in A. Takayama, et al. eds. Trade, Policy, and International Adjustments. San Diego: Academic Press, pp. 95-107.

 

R. Jones (1992). "Factor Scarcity, Factor Abundance and Attitudes Toward Protection: the 3x3 Model". Journal of International Economic Integration; V.7-#1, pp. 1-19.

 

R. Jones, S. Marjit and T. Mitra (1993). "The Stolper-Samuelson Theorem: Links to Dominant Diagonals". Becker, et al. eds. General Equilibrium, Growth and Trade, II. San Diego: Academic Press.

 

-E. Leamer (1994). “Commemorating the Fiftieth Birthday of the Stolper-Samuelson Theorem”. In A. Deardorff and R. Stern, eds. The Stolper-Samuelson Theorem: A Golden Jubilee. Ann Arbor: University of Michigan Press, pp. 289-307.

 

A. Deardorff and R. Staiger (1988). "An Interpretation of the Factor Content of Trade". Journal of International Economics; V.24-#?, pp. 93-107.

 

● The Production Sector with Variable Returns to Scale

 

■ Required

 

H. Herberg and M. Kemp (1968). Some Implications of Variable Returns to Scale". Canadian Journal of Economics, V.2-#3, pp. 403-415.

 

■ Supplementary

 

Markusen/Melvin, Chapter 11: "Increasing Returns to Scale"

 

M. Kemp (1969). "Variable Returns to Scale". Chapter 9 in The Pure Theory of International Trade and Investment. Englewood Cliffs: Prentice Hall, pp. 154-177 (also pp. 270-275).

 

W. Mayer (1974). "Homothetic Production Functions and the Shape of the Production Possibility Locus". Journal of Economic Theory; V.8-#?, pp. 101-110. (Response by Herberg/Kemp, V.11: pp. 287-288).

 

J. Markusen and L. Svensson (1990). "Factor Endowments and Trade with Increasing Returns: Generalizations and Extensions". International Economic Journal; V.4-#3, pp. 1-21.

 

J. Markusen and A. Schweinberger (1990). "The Positive Theory of Production Externalities under Perfect Competition". Journal of Internaitonal Economics; V.29-#1/2, pp. 69-91.

 

-T. Ide and A. Takayama (1991). "Variable Returns to Scale, Paradoxes and Global Correspondences in the Theory of International Trade". in A. Takayama, et al. eds. Trade, Policy, and International Adjustments. San Diego: Academic Press, pp. 108-154.

 

● Production Equilibrium under Joint Production

 

■ Required


                                    Woodland, Chapter 5

 

M. Hirota and K. Kuga (1971). "On Intrinsic Joint Production". International Economic Review; V.12-#1, pp. 87-98.

 

A. Woodland (1977). "Joint Outputs, Intermediate Inputs and International Trade Theory" International Economic Review; V.18-#3, pp. 517-533.

 

W. Chang, W. Ethier and M. Kemp (1980). "The Theorems of International Trade with Joint Production". Journal of International Economics; V.10-#?, pp. 377-394.

 

■ Supplementary: Interindustry Flows

 

M. Kemp (1969). "Intermediate Goods". in M. Kemp The Pure Theory of International Trade and Investment. Englewood Cliffs: Prentice-Hall, pp. 148-153.

 

C. Khang (1971). "An Isovalue Locus Involving Intermediate Goods and Its Application to the Pure Theory of International Trade". Journal of International Economics; V.1-#?, pp. 315-326.

 

M. Kemp and Y. Uekawa (1972). "Produced Inputs and Their Implications for Trade Theory". Economic Record; V.?-#4, pp. 561-569.

 

W. Chang and W. Mayer (1973). "Intermediate Goods in a General Equilibrium Trade Model". International Economic Review; V.14-#2, pp. 447-459.

 

K. Okuguchi (1973). "Magnification Effects in a Two-Good Model with Intermediate Inputs". Zeitschrift fur Nationalokonomie; V.33-#?, pp. 413-418.

 

A. Schweinberger (1975). "The Heckscher-Ohlin Model and Traded Intermediate Products". Review of Economic Studies; V.42-#?, pp. 269-278.

 

W. Chang (1977). "Tariff Structure and Output Adjustment in the Presence of Interindustry Flows". Journal of International Economics; V.7-#?, pp. 329-342.

 

C. Khang and Y. Uekawa (1973). "The Production Possibility Set in a Model Allowing Interindustry Flows: The Necessary and Sufficient Conditions for Convexity". Journal of International Economics; V.3-#?, pp. 283-290.

 

D. Scheffman (1973). "Some Remarks on the Net Production Possibilities Set in Models with Intermediate Goods". Journal of International Economics; V.3-#?, pp. 291-296.

 

M. Kemp and C. Khang (1977). "On the Relationship Between Commodity Prices and Gross Outputs in a General Neo-Classical Technology". International Economic Review; V.18-#?, pp. 241-245.

 

M. Kemp, C. Khang and Y. Uekawa (1978). "On the Flatness of the Transformation Surface". Journal of International Economics; V.8-#?, pp. 537-542.

 

■ Supplementary: Pure Intermediates

 

R. Batra and F. Casas (1973). "Intermediate Products and the Pure Theory of International Trade: A Neo-Heckscher-Ohlin Framework". American Economic Review; V.63-#3, pp. 297-311.

 

A. Schweinberger (1975). "Pure Traded Intermediate Products and the Heckscher-Ohlin Theorem". American Economic Review; V.65-#4, pp. 634-643.

 

A. Schweinberger (1975). "Comparative Advantage and Intermediate Products". Economic Record; V.51-#?, pp. 191-202.

 

J. Riedel (1976). "Intermediate Products and the Theory of International Trade: A Generalization of the Pure Intermediate Goods Case". American Economic Reveiw; V.66-#3, pp. 441-447.

 

W. Der (1979). "Multi-Intermediate-Goods Trade: The Gains and a Heckscher-Ohlin Analysis". American Economic Review; V.69-#4, pp. 575-586.

 

M. Tawada (1982). "The Properties of the Set of Production Possibilities with Pure Intermediate Products". in M. Kemp, ed. Production Sets. New York: Academic Press, pp. 17-23.

 

■ Supplementary: Joint Products

 

K. Kuga (1972). "The Factor-Price Equalization Theorem". Econometrica; V.40-#?, pp. 723-736.

 

M. Kemp and W. Ethier (1976). "A Note on Joint Production and the Theory of International Trade". in M. Kemp, Three Topics in the Theory of International Trade. Amsterdam: North Holland, pp. 81-84.

 

M. Kemp, R. Manning, K. Nishimura and M. Tawada (1980). "On the Shape of the Single-Country and World Commodity-Substitution and Factor-Substitution Surfaces under Conditions of Joint Production". Journal of International Economics; V.10-#?, pp. 395-404.

 

P. Samuelson (1992). "Factor-Price Equalization by Trade in Joint and Non-Joint Production". Review of International Economics; V.1-#1, pp. 1-9.

 

R. Jones (1992). "Jointness in Production and Factor-Price Equalization". Review of International Economics; V.1-#1, pp. 10-18.

 

● Non-Traded Goods

 

■ Required


                                    Woodland, Chapter 8

 

W. Ethier (1972). "Nontraded Goods and the Heckscher-Ohlin Model". International Economic Review; V13-#1, pp. 132-147.

 

■ Supplementary

 

W. Ethier (1971). "The Two Sector Neoclassical Production Model: A Geometric Note and an Extension to Nontraded Goods". Australian Economic Papers; V.13-#?; pp. 188-195.

 

B. Hazari, P. Sgro and D. Suh (1980). "A Simple Geometric Treatment of Non-traded Goods in the Pure Theory of International Trade". Keio Economic Studies; V.17-#1, pp. 91-104.

 

B. Hazari, P. Sgro and D. Suh (1980). Non-Traded and Intermediate Goods and the Pure Theory of International Trade. New York: St. Martins.

 

F. Rivera-Batiz (1982). "Nontraded Goods and the Pure Theory of International Trade with Equal Numbers of Goods and Factors". International Economic Review; V.23-#2, pp. 401-409.

 

T. Inoue (1985). "Theorems of International Trade with Nontraded Goods". Economic Studies Quarterly; V.36-#2, pp. 121-132.

 

A. Deardorff and P. Courant (1990). "On the Likelihood of Factor Price Equalization with Nontraded Goods". International Economic Review; V.31-#3, pp. 589-596.

 

W.M. Corden and J.P. Neary (1982). "Booming Sector and De-industrialization in a Small Open Economy". Economic Journal; V.92-#?, pp. 825-848.

 

H. Flamm (1985). "A Heckscher-Ohlin Analysis of the Law of Declining International Trade". Canadian Journal of Economics; V.18-#3, pp. 602-615.

 

● Heterogeneous Consumer Demand and Trade: Extending the Basic Framework

 

■ Required


                                    Woodland, Chapter 6

 

A. Deardorff (1986). "FIRless FIRwoes: How Preferences Can Interfere with the Theorems of International Trade". Journal of International Economics; V.20-#1/2, pp. 131-142.

 

■ Supplementary

 

P. Kenen (1959). "Distribution, Demand and Equilibrium in International Trade". KYKLOS; V.12-#4, pp. 629-638.

 

H.G. Johnson (1959). "International Trade, Income Distribution and the Offer Curve". Manchester School; V.27-#?, pp. 241-260.

 

R. Jones (1972). "Activity Analysis and Real Incomes: Analogies with Production Models". Journal of International Economics; V.2-#?, pp. 277-302.

 

A. Woodland (1974). "Demand Conditions in International Trade Theory". Australian Economic Papers; V.13-#?, pp. 209-224.

 

R. Ruffin (1979). "A Note on the Heckscher-Ohlin Theorem". Journal of International Economics; V.7-#?, pp. 403-405.

 

R. Jones (1980). "Demand Behavior and the Theory of International Trade". in J. Chipman and C. Kindleberger, eds., Flexible Exchange Rates and the Balance of Payments. Amsterdam: North-Holland.

 

J. Melvin (1985). "Domestic Taste Differences, Transportation Costs and International Trade". Journal of International Economics; V.18-#?, pp. 65-82.

 

Y. Horiba (1979). "Testing the Demand Side of Comparative Advantage Models". American Economic Review; V.69-#4, pp. 650-661.


Topic IV. Free Trade and Equilibrium Trade Patterns in Canonical Trade Models

 

● General Readings

 

■ Required


                                    Dixit/Norman, Chapters 3 (sections 1 and 3)


                                    Woodland, Chapter 6, section 5 and Chapter 7

 

J. Chipman (1979). "The Theory and Application of Trade Utility Functions". in J. Green and J. Scheinkman, eds. General Equilibrium, Growth and Trade. New York: Academic Press, pp. 277-296.

 

A.D. Woodland (1980). "Direct and Indirect Trade Utility Functions". Review of Economic Studies; V.47-#?, pp. 907-926.

 

A. Deardorff (1980). "The General Validity of the Law of Comparative Advantage". Journal of Political Economy; V.88-#?, pp. 941-957.

 

■ Supplementary

 

J. Chipman (1965). "A Survey of the Theory of International Trade: Part 1, The Classical Theory". Econometrica; V.33-#3, pp. 477-519.

 

J. Chipman (1965). "A Survey of the Theory of International Trade: Part 2, The Neo-Classial Theory". Econometrica; V.33-#4, pp. 685-760.

 

J. Chipman (1966). "A Survey of the Theory of International Trade: Part 3, The Modern Theory". Econometrica; V.34-#1, pp. 18-76.

 

J. Chipman (1987). "International Trade". in J. Eatwell, et al. eds., The New Palgrave Dictionary of Ecnomics. London: Macmillan, pp. 922-955.

 

● The Classical (Ricardian) Theory

 

■ Required

 

R. Dornbusch, S. Fischer, and P. Samuelson (1977). “Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods”. American Economic Review; V.67-#5, pp. 823-839. [sections I-III only]

 

R. Jones (1980). "Comparative and Absolute Advantage". Schweiz. Zeitschrift für Volkswirtschaft und Statistik; V.116-#3, pp. 235-259.

 

R. Ruffin (1988). "The Missing Link: The Ricardian Approach to the Factor Endowments Theory of Trade". American Economic Review; V.78-#4, pp. 759-772.

 

B. Balassa (1963). “An Empirical Demonstration of Classical Comparative Cost Theory”. Review of Economis and Statistics; V.45-#?, pp. 231-238.

 

■ Supplementary


                                    CFJ, Chapter 5: "Technology and the Ricardian Trade Model".

 

Markusen/Melvin, Chapter 7, "The Classical Model"

 

● The Specific-Factors (Ricardo-Viner) Theory

 

■ Required

 

W. Mayer (1974). "Short-run and Long-run Equilibrium for a Small Open Economy". Journal of Political Economy; V.82-#5, pp. 955-967.

 

J.P. Neary (1978). "Short-Run Capital Specificity and the Pure Theory of International Trade". Economic Journal; V.88-#?, pp. 488-510. in Bhagwati.

 

■ Supplementary


                                    CFJ, Chapter 6: "Increasing Costs, Specific Factors and Trade"


                                    Markusen/Melvin, Chapter 9: "The Specific Factor Model"

 

P. Samuelson (1971). "Ohlin was Right". Swedish Journal of Economics; V.73-#4, pp. 365-384.

 

R. Jones (1971). "A Three-Factor Model in Theory, Trade and History". in J. Bhagwati, et al. Trade, Balance of Payments and Growth. Amsterdam: North-Holland, pp. 3-21.

 

● The Factor-Proportions (Heckscher-Ohlin) Theory

 

■ Required: Theoretical

 

Dixit/Norman, Chapter 4

 

A. Deardorff (1979). “Weak Links in the Chain of Comparative Advantage”. JIE; V.9-#2, pp. 197-209. [in Bhagwati]

 

A. Dixit and A. Woodland (1982). "The Relationship between Factor Endowments and Commodity Trade". Journal of International Economics; V.13-#?, pp. 201-214.

 

-A. Deardorff (1994). "The Possibility of Factor Price Equalization". Journal of International Economics; V.36-#1/2, pp. 167-175.

 

■ Required--Empirical

 

-E. Leamer (1980). "The Leontief Paradox Reconsidered". JPE; V.88-#3, pp. 495-503. (Correction in I. Heravi (1986), V.94-#5, pg. 1120)

 

-R. Brecher and E. Choudhri (1982). "The Leontief Paradox, Continued". JPE; V.90-#4; pp. 820-823.

 

-F. Casas and E.K. Choi (1985). "The Leontief Paradox: Continued or Resolved". JPE; V.93-#?, pp. 610-615.

 

-K. Maskus (1985). "A Test of the Heckscher-Ohlin-Vanek Theorem: The Leontief Commonplace". JIE; V.19-#3/4, pp. 201-212.

 

-H. Bowen, E. Leamer and L. Sveikauskas (1987). "Multicountry, Multifactor Tests of Factor Abundance Theory". AER; V.77-#5, pp. 791-809.

 

-R. Staiger (1988). "A Specification Test fo the Heckscher-Ohlin Theory". JIE; V.25-#?, pp. 129-141.

 

■ Supplementary--Theoretical

 

CFJ, Chapter 7: "Factor Endowments and the 2×2 Heckscher-Ohlin Theory"


                                    Markusen/Melvin, Chapter 8: "The Endowment Model"

 

E. Helpman and P. Krugman (1985). "The Factor Proportions Theory". Chapter 1 of Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and the International Economy. Cambridge: MIT, pp. 11-29.

 

R. Jones (1987). "Heckscher-Ohlin Trade Theory". in J. Eatwell, M. Milgate and P. Newman, eds. The New Palgrave Dictionary of Economics. New York: Stockton Press, pp. 620-627.

 

W. Ethier (1982). "The General Role of Factor Intensity in the Theorems of International Trade". Economics Letters; V.10-#?, pp. 337-342.

 

A. Deardorff (1982). "The General Validity of the Heckscher-Ohlin Theorem". American Economic Review; V.72-#?, pp. 683-694.

 

R. Brecher and E. Choudhri (1982). "The Factor Content of International Trade without Factor-Price Equalization". Journal of International Economics; V.12-#?, pp. 277-283.

 

E. Helpman (1984). "The Factor Content of Foreign Trade". Economic Journal; V.94-#?, pp. 84-94.

 

R. Staiger (1986). "Measurement of the Factor Content of Foreign Trade with Traded Intermediate Goods". Journal of International Economics; V.21-#?, pp. 581-588.

 

J.P. Neary and A. Schweinberger (1986). "Factor Content Functions and the Theory of International Trade". Review of Economic Studies; V.53-#?, pp. 421-432.

 

■ Supplementary: Empirical

 

R. Stern (1975). "Testing Trade Theories". in P. Kenen, ed. International Trade and Finance: Frontiers for Research. Cambridge: CUP, pp. 3-49.

 

J. Hartigan (1981). "The US Tariff and Comparative Advantage: A Survey of Method". Weltwirtschaftliches Archiv; V.117-#1, pp. 65-108.

 

R.J. Bowden (1983). "The Conceptual Basis of Emprical Studies of Trade in Manufactured Commodities: A Constructive Critique". Manchester School; V.51-#3, pp. 209-234.

 

A. Deardorff (1984). "Testing Trade Theories and Predicting Trade Flows". in R. Jones and P. Kenen, eds. Handbook of International Economics. Amsterdam: North-Holland, pp. 467-517.

 

E. Leamer (1984). "Testing the Theories of International Comparative Advantage". Chapter 2 in Sources of International Comparative Advantage. Cambridge: MIT, pp. 45-59.

 

E. Leamer (1992). "Testing Trade Theory".In D. Greenaway and L.A. Winters, ed. Surveys in International Trade. Oxford: Blackwell, pp. 66-106.

 

W. Kohler (1988). "Modeling Heckscher-Ohlin Comparative Advantage in Regression Equations: A Critical Survey". Empirica; V.15-#2, pp. 263-293.

 

K. Maskus (1991). "Comparing International Trade Data and Product and National Characteristics Data for the Analysis of International Trade Models". in P. Hooper and J.D. Richardson, eds. International Economic Transactions: Issues in Measurement and Empirical Research. Chicago: University of Chicago Press/NBER, pp. 17-56.

 

● Trade and Trade Patterns with International Factor Mobility

 

■ Required

 

R. Mundell (1957) "International Trade and Factor Mobility", American Economic Review, V.47-#3, pp. 321-335. also in Bhagwati.

 

K.Y. Wong (1986). "Are International Trade and Factor Mobility Substitutes?" Journal of International Economics; V.21-#?, pp. 25-43. also in Bhagwati.

 

W. Ethier and L. Svensson (1986). "The Theorems of International Trade with Capital Mobility". Journal of International Economics; V.20-#?, pp. 21-42.

 

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.

 

■ Supplementary

 

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) QJE; V.83-#?, 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.

 

D.G. Ferguson (1978). "International Capital Mobility and Comparative Advantage". Journal of International Economics; V.8-#?, pp. 373-396.

 

R. Brecher and R. Feenstra (1983). "International Trade and Capital Mobility between Diversified Economies". Journal of International Economics; V.14-#?, pp. 321-339.

 

T. Inoue (1986). "On the Shape of the World Production Possibility Frontier with Three Goods and Two Primary Factors with and without Capital Mobility". International Economic Review; V.27-#3, pp. 707-726.

 

S.P. Das and S.D. Lee (1979). "On the Theory of International Trade with Capital Mobility". International Economic Review; V.20-#1, pp. 119-132.

 

A.D. Woodland (1983). "Stability, Capital Mobility and Trade". International Economic Review; V.24-#2, pp. 475-483.

 

L. Young and J. Romero (1991). "International Investment and the Positive Theory of International Trade". Journal of International Economics; V.29-#3/4, pp. 333-349.

 

● Trade with Lumpy Countries: An Application of/to Regional Economics

 

■ Required

 

P. Courant and A. Deardorff (1992). "International Trade with Lumpy Countries". Journal of Political Economy; V.100-#1, pp. 198-210.

 

■ Supplementary

 

P. Courant and A. Deardorff (1993). "Amenities, Nontraded Goods, and the Trade of Lumpy Countries". Journal of Urban Economics; V.34-#?, pp. 299-317.

 

J. Wilson (1990). "Trade and the Distribution of Economic Well-being in an Economy with Local Public Goods". Journal of International Economics; V.29-#3/4, pp. 199-215.

 

E. Bond (1993). "Trade, Factor Mobility, and Income Distribution in a Regional Model with Compensating Wage Differentials". Regional Science and Urban Economics; V.23-#1, pp. 67-84.

 

S. Bucovetsky (1993). "Factor Ownership, Taxes and Specialization". Canadian Journal of Economics; V.26-#2, pp. 317-336.


Topic V. Gains From Trade

 

● Constant Returns to Scale

 

■ Required


                                    Dixit/Norman, Chapter 3, section 2


                                    Woodland, Chapter 9.

 

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.

 

■ Supplementary

 

M. Kemp (1962). "The Gain From International Trade". Economic Journal; V.72-#?, pp. 803-819.

 

P. Samuelson (1962). "The Gains from International Trade Once Again". Economic Journal; V.72-#?, pp. 820-829.

 

A. Krueger and H. Sonnenschein (1967). "The Terms of Trade, the Gains from Trade and Price Divergence". International Economic Review; V.8-#1, pp. 121-127.

 

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

 

Y. Otani (1972). "Gains from Trade Revisited". Journal of International Economics; V.2-#?, pp. 127-156.

 

H. Wan (1972). "A Note on Trading Gains and Externalities". Journal of International Economics; V.2-#?, pp. 173-180.

 

M. Kemp and H. Wan (1972). "The Gains from Free Trade". International Economic Review; V.13-#?, pp. 509-522.

 

J. Chipman and J. Moore (1972). "Social Utility and the Gains from Trade". Journal of International Economics; V.2-#?, pp. 157-172.

 

M. Ohyama (1972). "Trade and Welfare in General Equilibrium". Keio Economic Studies; V.9-#1, pp. 37-73.

 

E. Grinols and K.Y. Wong (1991). "An Exact Measure of Welfare Change". Canadian Journal of Economics; V.24-#2, pp. 428-449.

 

H. Wan (1965). "Maximum Bonus--an Alternative Measure for Trading Gains". Review of Economic Studies; V.32-#?, pp. 49-58.

 

P.J. Lloyd and A. Schweinberger (1988). "Trade Expenditure Functions and the Gains from Trade". Journal of International Economics; V.24-#?, pp. 275-297.

 

● Generalizing the CRS Case: Customs Unions and the Kemp-Wan Theorem

 

■ Required

 

M. Kemp and H. Wan (1976). "An Elementary Proposition Concerning the Formation of Customs Unions". in M. Kemp, Three Topics in the Theory of International Trade: Distribution, Welfare and Uncertainty. Amsterdam: North-Holland. in Bhagwati.

 

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

 

R. Lipsey (1960). "The Theory of Customs Unions: A General Survey". EJ; V.70-#279, pp. 496-513. also in Bhagwati.

 

C. Kowalczyk (1993). "Welfare and Customs Unions". ms.: Dartmouth.

 

■ Supplementary

 

E. Grinols (1981). "An Extension of the Kemp-Wan Theorem on the Formation of Customs Unions". Journal of International Economics; V.11-#?, pp. 259-266.

 

E. Grinols (1984). "A Thorn in the Lion's Paw: Has Britain Paid Too Much for Common Market Membership?" Journal of International Economics; V.16-#?, pp. 271-293.

 

M. Kemp and H. Wan (1986). "The Comparison of Second-Best Equilibria: The Case of Customs Unions". Zeitschfift fur Nationalokonomie; V.93-supplement #5, pp. 161-167.

 

● Gains from Trade without Lump-Sum Compensation

 

■ Required

 

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 Economic Integration and Other Supply Side Policies”. 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.

 

■ Supplementary

 

J. Bhagwati and T.N. Srinivasan (1983). "The Superiority of Trade over Autarky, without Lump-Sum Transfers". in Lectures on International Trade. Cambridge: MIT, pp. 161-166.

 

M. Kemp and H. Wan (1986). "Gains from Trade with and without Lump-Sum Compensation". Journal of International Economics; V.21-#?, pp. 99-110.

 

A. Dixit and V. Norman (1986). "Gains from Trade without Lump-Sum Compensation". Journal of International Economics; V.21-#?, pp. 111-122.

 

F. Casas and J.D. Han (1988). "Achieving Pareto Superiority under Free Trade: An Alternative to the Dixit-Norman Scheme". International Economic Journal; V.2-#4, pp. 1-7.

 

R. Brecher and E. Choudhri (1990). "Gains from International Factor Movements without Lump-Sum Compensation: Taxation by Location versus Nationality". Canadian Journal of Economics; V.23-#1, pp. 44-59.

 

K.Y. Wong (1991). "Welfare Comparison of Trade Situations". Journal of International Economics; V.30-#1/2, pp. 49-68.

 

● Variable Returns to Scale

 

■ Required

 

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.

 

■ Supplementary

 

T. Negishi (1969). "Marshallian External Economies and the Gains from Trade Between Similar Countries". Review of Economic Studies; V.36-#1, pp. 131-135.

 

M. Kemp and T. Negishi (1970). "Variable Returns to Scale, Commodity Taxes, Factor Market Distortions and Their Implications for Trade Gains". Swedish Journal of Economics; V.72-#1, pp. 1-11.

 

H. Wan (1972). "A Note on Trading Gains and Externalities". Journal of International Economics; V.2-#?, pp. 173-180.

 

T. Negishi (1972). "External Economies and Trade Between Similar Economies". Chapter 5 in General Equilibrium Theory and International Trade. Amsterdam: North-Holland, pp. 73-89.

 

E. Helpman (1983). "Variable Returns to Scale and International Trade: Two Generalizations". Economics Letters; V.11-#?, pp. 167-174.

 

E. Grinols (1991). "Increasing Returns and the Gains from Trade". International Economic Review; V.32-#4, pp. 973-984.

 

E. Grinols (1992). "Increasing Returns to Scale and Trade-Related Industry Enlargement: A Generalization and New Proof of Welfare Gains". Economics Letters; V.38-#1, pp. 61-66.

 

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-#?, pp. 807-816.

 

J. Eaton and A. Panagariya (1979). "Gains from Trade under Variable Returns to Scale, Commodity Taxation, Tariffs and Factor Market Distortions". Journal of International Economics; V.9-#?, pp. 481-501.

 

J.Y. Choi and E.S.H. Yu (1984). "Gains from Trade Under Variable Returns to Scale". Southern Economic Journal; V.50-#?, pp. 979-992.

 

E.S.H. Yu and S. Patterson (1990). "Trade and Welfare under Variable Returns to Scale". Indian Economic Journal; V.37-#3, pp. 53-58.


Topic VI. The Theory of Economic Policy

 

■ Required General Reading


                                    Woodland, Chapters 10 and 11


                                    Dixit/Norman, Chapter 6

 

● Distortions and Policy Targeting

 

■ Required

 

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.

 

■ Supplementary

 

A. Vandendorpe (1972). "Optimal Tax Structures in a Model with Traded and Non-Traded Goods". Journal of International Economics; V.2-#?, pp. 235-256.

 

A. Takayama (1972). "On the Analytical Framework of Tariffs and Trade Policy". in G. Horwich and P. Samuelson, Trade Stability and Macroeconomics. New York: Academic Press, pp. 153-178.

 

M. Ohyama (1972). "Trade and Welfare in General Equilibrium". Keio Economic Studies; V.9-#2, pp. 37-73.

 

S. Anand and V. Joshi (1979). "Domestic Distortions, Income Distribution and the Theory of the Optimum Subsidy". Economic Journal; V.89-#?, pp. 336-352.

 

A. Smith (1980). "Optimal Tariffs, Optimal Taxes and Shadow Prices". in J. Black and B. Hindley, eds. Current Issues in Commercial Policy. NY: St. Martins, pp. 10-25.

 

● Tariffs, Optimal and Otherwise

 

■ Required

 

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". AER. V.59-#3, pp. 418-423.

 

E. Bond (1990). "The Optimum Tariff Structure in Higher Dimensions". IER; V.31-#?, 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

 

■ Supplementary

 

T. Scitovsky (1942). "A Reconsideration of the Theory of Tariffs". Review of Economic Studies; V.9-#2, pp. 89-110.

 

R. Baldwin (1952). "The New Welfare Economics and the Gains from Trade". Quarterly Journal of Economics; V.66-#1, pp. 91-101. also in Caves and Johnson.

 

J. Graaf (1949-50). "On Optimum Tariff Structures". Review of Economic Studies; V.17-#42, pp. 47-59.

 

M. Kemp (1967). "Notes on the Theory of Optimal Tariffs". Economic Record; V.43-#?, pp. 395-404.

 

D.J. Horwell and I. Pearce (1970). "A Look at the Structure of Optimal Tariff Rates". International Economic Review; V.11-#?, pp. 147-161.

 

S.P. Das (1983). "Optimum Tariffs on Final and Intermediate Goods". International Economic Review; V.24-#2, pp. 493-508.

 

R. Feenstra (1986). "Trade Policy with Several Goods and 'Market Linkages'". Journal of International Economics; V.20-#?, pp. 249-267.

 

M. Itoh and K. Kiyono (1987). "Welfare Enhancing Export Subsidies". Journal of Political Economy; V.95-#1, pp. 115-137.

 

L. Young (1991). "Optimal Tariffs: A Generalization". International Economic Review; V.32-#2, pp. 341-370.

 

D. Rodrik (1989). "Optimal Trade Taxes for a Large Country with Non-Atomistic Firms". Journal of International Economics; V.26-#?, pp. 157-167.

 

J. Bhagwati and M. Kemp (1969). "Ranking of Tariffs Under Monopoly Power in Trade". Quarterly Journal of Economics; V.83-#?, pp. 330-335.

 

J. Riley (1970). "Ranking of Tariffs under Monopoly Power in Trade: An Extension". Quarterly Journal of Economics; V.84-#?, pp. 709-712.

 

E. Tower (1975). "On the Functional Relationship Between Tariffs and Welfare". Journal of Internaitonal Economics; V.5-#2, pp. 189-199.

 

W. Chang and M. Michael (1988). "The Optimum Tariff and Its Optimum Income Distribution". Economics Letters; V.28-#?, pp. 369-374.

 

W. Chang and M. Michael (1991). "Income Distribution and the Optimum Tariff". Keio Economic Studies; V.28-#2, pp. 1-11.

 

W. Chang (1993). "The Optimum Tariff Structure in a Small, Open, Multi-Household Economy". in H. Herberg and N.V. Long, eds., Trade, Welfare and Economic Policies. Ann Arbor: University of Michigan Press, pp. 177-191.

 

● Incremental Policy Reform

 

■ Required

 

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". REStud; V.56-#?, pp. 199-216.

 

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

 

■ Supplementary

 

R. Lipsey and K. Lancaster (1956). "The General Theory of Second Best". Review of Economic Studies; V.24-#1, pp. 11-32.

 

J. Green (1961). "The Social Optimum in the Presence of Monopoly and Taxation". Review of Economic Studies; V.29-#1, pp. 66-77.

 

E. Foster and H. Sonnenschein (1970). "Price Distortion and Economic Welfare". Econometrica; V.38-#2, pp. 281-297.

 

T. Bertrand and J. Vanek (1971). "The Theory of Tariffs, Taxes and Subsidies: Some Aspects of the Second Best". American Economic Review; V.61-#?, pp. 925-931.

 

P.J. Lloyd (1974). "A More General Theory of Price Distortions in Open Economies". Journal of International Economics; V.4-#4, pp. 365-386.

 

T. Hatta (1977). "A Recommendation for a Better Tariff Structure". Econometrica; V.45-#8, pp. 1859-1869.

 

T. Fukushima (1979). "Tariff Structure, Nontraded Goods and Theory of Piecemeal Policy Recommendations". International Economic Review; V.20-#2, pp. 427-435.

 

T. Fukushima (1981). "A Dynamic Quantity Adjustment Process in a Small Open Economy, and Welfare Effects of Tariff Changes". Journal of International Economics; V.11-#?, pp. 513-529.

 

R. Falvey (1988). "Tariffs, Quotas and Piecemeal Policy Reform". Journal of International Economics; V.25-#?, pp. 177-183.

 

W.E. Diewert, A. Turunen-Red and A. Woodland (1991). "Tariff Reform in a Small Open Many-Household Economy with Domestic Distortions and Non-Traded Goods". International Economic Review; V.32-#4, pp. 937-957.

 

G. Fane (1991). "The Global Efficiency of Radial Tax Reductions". International Economic Review; V.32-#4, pp. 853-857.

 

K. Abe (1992). "Tariff Reform in a Small Open Economy with Public Production". International Economic Review; V.33-#1, pp. 209-222.

 

A. Panagariya (1992). "Input Tariffs, Duty Drawbacks, and Tariff Reforms". Journal of International Economics; V.32-#1/2, pp. 131-147.

 

R. Lopez and A. Panagariya (1992). "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs". American Economic Review; V.82-#3, pp. 615-625.

 

J. Beghin and L. Karp (1992). "Tariff Reform in the Presence of Sector-Specific Distortions". Canadian Journal of Economics; V.25-#2, pp. 294-309.

 

J. Beghin and L. Karp (1992). "Piecemeal Trade Reform in the Presence of Producer-Specific Domestic Subsidies". Economics Letters; V.39-#?, pp. 65-71.

 

A. Turunen-Red (1987). "Economic Inequality and Public Policy in a Small Open Economy". Scandinavian Journal of Economics; V.89-#4, pp. 405-419.