PECN 600-2

Majors’ Seminar in Political Economy:

The Political Economy of International Trade, Income Distribution, and Growth

Professor: Nelson

Office: Murphy Institute (108 Tilton)

Phone: 865-5317

One way or another, international trade is implicated in a wide range of issues of fundamental importance to modern political economy. In this course we will examine this relationship in two related contexts. In the first part of the course we will study the relationship between trade and income distribution in the United States and the extent to which the politics of international trade can be seen as a distributional struggle. In the second part of the course we will turn to a more global and more dynamic question: the relationship between trade/industrial policy and economic growth. Both of these are currently contentious issues with considerable implications for economic policy and for development of political economy theory. As a result we will be reading material that applies a wide variety of techniques and that differ widely on both positive and normative conclusions. One of our main goals will be to evaluate these arguments.

In addition to a number of articles, the main texts for the course will be:

S. Collins, ed. (1996). Imports, Exports and the American Worker. Washington, DC: Brookings.

S. Haggard and S. Webb, eds. (1994). Voting for Reform: Democracy, Political Liberalization and Economic Adjustment. New York: Oxford University Press.

World Bank (1993). The East Asian Miracle: Economic Growth and Public Policy. Washington, DC: The World Bank.

A. Fishlow, et al. (1994). Miracle or Design? Lessons from the East Asian Experience. Baltimore: Johns Hopkins University Press (for the ODC).

Evaluation of Performance: This course is a seminar. That means active participation from all students in every class. So that you will be able to discuss the issues and the readings, every member of the seminar is responsible for having read all of the reqired material by the class in which it is to be discussed. In addition to class participation, your performance in this course will be evaluated on the basis of:


1) Three short (i.e. 3 pages) reaction papers (20 points each, 60 total points);

2) Several homework assignments (40 points total)

3) A final examination (100 points); and

4) A paper (100 points).

To receive an A, you must earn at least 270 points out of the total of 300 points available. To pass the course you must earn at least 120 total points. Grades between these limits will be determined on the basis of your performance relative to that of the class as a whole.

With regard to the reaction papers. Because we will be reviewing a number of debates, it will be essential for students to actively attempt to come to grips with a variety of distinct, and contradictory, positions. A reaction paper is a short paper discussing some aspect of the relevant debate. In the reaction paper you must explicitly discuss all of the readings for that topic and evaluate some aspect of their discussion. Note: “evaluate” does not mean “agree or disagree with” but, rather, means identify the source of some disagreement between authors, explain why you think the disagreement is interesting/important, and explain why (given the arguments and evidence developed in the readings) one of the positions dominates the other. The reaction papers are due in class on the date we discuss the readings (see syllabus), late papers will not be accepted and will earn a grade of zero.

With regard to the homework: At the beginning of the semester we will review some basic concepts of statistical and econometric analysis. As part of this work, I will assign several homework assignments to familiarize you with some data sets and computer programs. These will be due in class one week following the class in which it is assigned.

With regard to the final examination. The final examination will be made up of a number of identification and short-answer questions, and an essay question that asks you to synthesize material from the course. That is, the exam will be cumulative over all material except that dealing specifically with statistics and econometrics [though questions applying those tools could of course be asked]. The final examination will be given only on Monday, 29 April 1996 at 1:00 pm. Do not make travel or other plans that conflict with either date.

With regard to the paper. It is in the nature of a course of this sort that much of the material presented will be at a fairly high level of generality. Thus, in an effort to provide you with the opportunity to develop some more detailed expertise, every student will select a country that has been actively involved in the trade reform process for detailed study. The country must be one of the following: Chile, Argentina, Mexico, Jamaica, Taiwan, Korea, Turkey, Poland, Russia. A satisfactory paper must examine the economics and politics of trade policy in your country. This is intended to be a substantial piece of research. An A paper must express a clear, positive argument and present evidence in support of that argument in a coherent fashion. I would expect most papers to be in the 25-30 page range. I expect you to use available primary and secondary sources, and I expect you to cite the authorities you use accurately and honestly. Plagiarism will not be tolerated. The paper is due by 5:00 pm on the last regularly scheduled day of class (23 April 1996). Late papers will not be accepted and will earn a grade of zero.

Syllabus: PECN 600Spring 1997

Political Economy of International Trade and Economic Performance

I. Some Basics of Econometric Analysis

            1. Random Variables and Distributions

            2. Hypothesis Tests

            3. Least Squares Analysis


4. Panel Data

            5. Heteroskedasticity and Autocorrelation

II. Trade, Wages and the Political Economy of Trade Policy: Static Analysis


Topic 1. International Trade and Income Distribution--

                        The Stolper-Samuelson Theorem in Theory and Practice


*Rodrik, Dani (1994). “The Rush to Free Trade in the Developing World: Why So Late? Why Now? Will it Last?”. in S. Haggard and S. Webb, eds. Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment. New York: Oxford/World Bank, pp. 61-88.


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


*S. Collins, ed. (1996). Imports, Exports and the American Worker. Washington, DC: Brookings.


-J. Bhagwati and M. Kosters, eds. (1994). Trade and Wages: Levelling Wages Down?. Washington, DC: American Enterprise Institute.

                        --First reaction paper due


Topic 2. Factor Endowments and the Pattern of Protection


*S. Magee (1980). “Three Simple Tests of the Stolper-Samuelson Theorem”. in P. Oppenheimer, ed. Issues in International Economics. London: Oriel Press, pp. 645-707.


*E. Ray (1981). "The Determinants of Tariffs and Nontariff Trade Restrictions in the US". JPE; V.89-#?, pp. 105-121.


*D. Trefler (1993). "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of US Import Policy". JPE; V.101-#1, pp. 138-160.


*R. Lopez and E. Pagoulatos (1996). “Trade Protection and the Role of Campaign Contributions in US Food and Tobacco Industries”. EcInq; V.34-#2, pp. 237-248.


Topic 3. Legislative and Administrative Protection in the US


i.. Legislative Voting on Trade


*W. Keech and K. Pak (1995). “Partisanship, Institutions, and Change in American Trade Politics”. JoP; V.57-#4, pp. 1130-1142.


*C. Coughlin (1985). "Domestic Content Legislation: House Voting and the Economic Theory of Regulation". EcInq; V.23-#?, pp. 437-448.


*S. Marks (1993). "Economic Interests and Voting on the Omnibus Trade Bill of 1987". PC, V.75-#1, pp. 21-42.


ii.. Administered Protection


*J.M. Finger, H.K. Hall and D.R. Nelson (1982). "The Political Economy of Administered Protection". AER; V.72-#3, pp. 452-466.


*R. Baldwin and J. Steagall (1991). "An Analysis of Factors Influencing ITC Decisions in Antidumping, Countervailing Duty and Safeguards Cases". WA; V.130-#2, pp. 290-307.


*M. Moore (1992). "Rules or Politics? An Empirical Analysis of Antidumping Decisions". EcInq; V.30-#3, pp. 449-466.

III. Income Distribution and Growth in Theory and Practice


Topic 1. Accounting for Growth


*East Asian Miracle, Chapter 1.


*R. Kormendi and P. Meguire (1985). "Macroeconomic Determinants of Growth: A Cross-Country Study". JME; V.16-#?, pp. 141-163.


*K. Grier and G. Tullock (1989). "An Empirical Analysis of Cross-National Economic Growth, 1951-1980". JME; V.24-#?, pp. 259-276.


*R. Levine and D. Renelt (1992). "A Sensitivity Analysis of Cross-Country Growth Regressions". AER; V.82-#4, pp. 942-963.


-Mankiw, N.G., D. Romer and D. Weil (1992). "A Contribution to the Empirics of Economic Growth". QJE; V.107-#2, pp. 407-437.


-S. Sala-i-Martin (1994). “Cross-Sectional Regressions and the Empirics of Economic Growth”. EER; V.38-#3/4, pp. 739-747.


-C. Jones (1995). “Time Series Tests of Endogenous Growth Models”. QJE; V.110-#2, pp. 495-525.


-P. Evans (1996). “Using Cross-Country Variances to Evaluate Growth Theories”. Journal of Economic Dynamics and Control; V20-#?, pp. 1027-1049.


Topic 2. Income Distribution and the Political Economy of Growth


*P. Lindert and J. Williamson (1985). "Growth, Equality, and History". Explorations in Economic History; V.22-#4, pp. 341-377.


*F. Bourguignon and C. Morrisson (1990). "Income Distribution, Development and Foreign Trade: A Cross-Sectional Analysis". European Economic Review; V.34-#6, pp. 1113-1132.


*J. Helliwell (1994). “Empirical Linkages between Democracy and Growth”. British Journal of Political Science; V.24-#?, pp. 225-248.


*R. Perotti (1996). “Growth, Income Distribution and Democracy: What the Data Say”. Journal of Economic Growth; V.1-#1, pp. 149-187.


Topic 3. Public Policy, Political Institutions and Growth


*East Asian Miracle, Chapters 2 and 4.


*A. Alesina (1994). “Political Models of Macroeconomic Policy and Reform”. in S. Haggard and S. Webb, eds. Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment. New York: Oxford/World Bank, pp. 37-60.


*R. Fernandez and D. Rodrik (1991). "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty". AER; V.81-#5, pp. 1146-1155.


*J. Nelson (1984). "The Political Economy of Stabilization: Commitment, Capacity, and Public Response". World Development; V.12-#10, pp. 983-1006.


*S. Haggard and S. Webb (1993). "What Do We Know about the Political Economy of Economic Reform". WBRO; V.8-#2, pp. 143-168.


*B. Levy (1993). "An Institutional Analysis of the Design and Sequencing of Trade and Investment Policy Reform". WBER; V.7-#2, pp. 247-262.


*D.R. Mares (1990). "Domestic Institutions and Shifts in Trade and Development Policy". in J. Odell and T. Willett, eds. International Trade Policies: Gains from Exchange Between Economics and Political Science. Ann Arbor: University of Michigan Press. pp. 193-223.


-S. Haggard (1991). “The Transition to Export Led Growth in South Korea: 1954-1966”. Journal of Asian Studies; V.50-#, pp. 850-873.


-M. Pastor and C. Wise (1994). "The Origins and Sustainability of Mexico's Free Trade Policy". IO; V.48-#3, pp. 459-489.


-R. Dornbusch and S. Edwards (1990). "Macroeconomic Populism". JDevE; V.32-#2, pp. 247-277.


-J. Nelson, ed. (1989). Fragile Coalitions: The Politics of Economic Adjustment. New Brunswick: Transaction Books.


-J. Nelson, ed. (1990). Economic Crisis and Policy Choice: The Politics of Adjustment in the Third World. Princeton: PUP.


-S. Haggard and R. Kaufman, eds. (1992). The Politics of Adjustment: International Cosntraints, Distributive Politics and the State. Princeton: PUP.


-A. Przeworski (1991). Democracy and the Market: Political and Economic Reform in Eastern Europe and Latin America. New York: Cambridge University Press.


-K. Remmer (1991). "The Political Impact of Economic Crisis in Latin America in the 1980s". APSR; V.85-#?, pp. 777-800.


-S. Haggard and R. Kaufman (1995). The Political Economy of Democratic Transitions. Princeton: PUP.

IV. The Political Economy of International Trade and Growth


Topic 1. Some Simple Analytics of Trade and Growth


*T.N. Rybczynski (1955). "Factor Endowments and Relative Commodity Prices". Eca; V.22-#88, pp. 336-341.


*H.G. Johnson (1959). “Economic Development and International Trade”. Nationaløkonomisk Tidsskrift; V.97-#5/6, pp. 253-272.


*R. Findlay and H. Grubert (1959). “Factor Intensities, Technological Progress and the Terms of Trade”. Oxford Economic Papers; V.?-#?, pp. 111-121.


Topic 2. Is There a Relationship Between International Trade and Growth?


*The East Asian Miracle, chapter 3.


i.. Cross Sectional Studies


-R. Ram (1985). "Exports and Economic Growth: Some Additional Evidence". EDCC; V.33-#2, pp. 415-425.


-G. Feder (1982). "On Exports and Economic Growth". JDevE; V.12-#?, pp. 59-73.


-D. Moschos (1989). "Export Expansion, Growth and Level of Economic Development". JDevE; V.16-#?, pp. 99-102.


-I. Kohli and N. Singh (1989). “Exports and Growth: Critical Minimum Effort and Diminishing Returns”. JDevE (?), V.30-#2, pp. 391-400.


-H. Esfahani (1991). “Exports, Imports and Economic Growth in Semi-Industrialized Economies”. JDevE; V.35-#1, pp. 93-116.


ii.. Time Series Studies


*W.S. Jung and P.J. Marshall (1985). "Exports, Growth and Causality in Developing Countries". JDevE; V.18-#2, pp. 1-12.


*N. Sung-Shen, B. Biswas and G. Tribedy (1990). “Causality between Exports and Economic Growth: An Empirical Study”. Journal of Economic Development; V.15-#1, pp. 47-115.


Topic 3. Import-Substitution vs. Export Orientation: The Basic Issues


*World Bank (1987). “Chapter 5: Trade Policy and Industrialization”. World Development Report. New York: OUP, pp. 78-94.


*P. Streeten (1982). "A Cool Look at 'Outward-Looking' Strategies for Development". World Economy; V.10-#?, pp. 159-169.


*H. Singer (1988). "The World Development Report, 1987 on the Blessings of 'Outward Orientation': A Necessary Correction". Journal of Development Studies; V.24-#2, pp. 232-236.


-D. Lal and S. Rajapatirana (1987). "Foreign Trade Regimes and Economic Development". WBER; V.2-#2, pp. 189-217.


-J. Bhagwati (1988). "Export-Promoting Trade Strategy: Issues and Evidence". WBER; V.3-#1, pp. 27-57.

                        --Second reaction paper due


Topic 4. Econometric Research on the Link Between Trade Policy and Growth


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


-D. Dollar (1992). "Outward-Oriented Developing Countries Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985". EDCC; V.40-#?, pp. 523-544.


-S. Edwards (1992). "Trade Orientation, Distortions and Growth in Developing Countries". JDevE, V.39-#1, pp. 31-57.


-D. Greenaway and D. Sapsford (1994). "Exports, Growth and Liberalization: An Evaluation". Journal of Policy Modelling; V.16-#2, pp. 165-186.


-A. Harrison (1996). “Openness and Growth: A Time-Series, Cross-Country Analysis for Developing Countries”. JDevE; V.48-#?, pp.


-A. Harrison and A. Revenga (1995). “The Effects of Trade Policy Reform: What Do We Really Know”. NBER Working Paper, #5225.


-V. Thomas and J. Nash (1991). Best Practices in Trade Reform. New York: Oxford.


Topic 5. What Are the Lessons of the East Asian Experience?


*The East Asian Miracle, Chapters 5 and 6.


*D. Rodrik (1993). “King Kong meets Godzilla: The World Bank and The East Asian Miracle”. Miracle or Design? New York: Overseas Development Council, pp. 13-53.


*R. Wade (1993). “Selective Industrial Policies in East Asia: Is The East Asian Miracle Right?”. Miracle or Design? New York: Overseas Development Council, pp. 55-79.


*S. Haggard (1993). “Politics and Institutions in the World Bank’s East Asia”. Miracle or Design? New York: Overseas Development Council, pp.81-109.


-D. Rodrik (1995). “Getting Interventions Right: How South Korea and Taiwan Grew Rich”. NBER Working Paper, #4964.


-A. Young (1994). “Lessons from the East Asian NICs: A Contrarian View”. EER; V.38-#?, pp. 964-973.


-A. Young (1995). “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Experience”. QJE; V.110-#3, pp. 641-680.


-World Development (1994). “Symposium on The East Asian Miracle”. World Development; V.22-#4, pp. 615-670. [papers by: Amsden, Kwon, Page, Perkins, and Yanaghira]


-J. Page (1994). “The East Asian Miracle: Four Lessons for Development Policy”. NBER Macroeconomics Annual--1994. Cambridge: MIT/NBER, pp. 219-269.

            --Third reaction paper due


Topic 6. The International Political-Economy of Trade Policy Reform


i.. Protectionist Pressure in AICs and the Fallacy of Composition


-D. Nelson. “The Welfare State and Export Optimism”, in D. Pirages and C. Sylvester, eds. The Transformations in the Global Political Economy. London: St. Martins. pp. 127-152.


-W.A. Lewis (1980). "The Slowing Down of the Engine of Growth". AER; V.70-#4, pp. 555-564.


-H. Hughes and J. Waelbroeck (1981). "Can Developing Country Exports Keep Growing in the 1980's?" World Economy; V.9-#?, pp. 127-149.


-W. Cline (1982). "Can the East Asian Export Model of Development be Generalized". World Development; V.10-#2, pp. 81-90.


-O. Havrylyshyn and J. Riedel (1982). "Is There Cause for Export Optimism? An Inquiry into the Existence of a Second Generation of Successful Exporters". WA; V.118-#4, pp. 650-662.


-H. Hughes and A. Krueger (1984). “Effects of Protection in Developed Countries on Developing Countries’ Exports of Manufactures”. in R. Baldwin and A. Krueger, eds. The Structure and Evolution of Recent US Trade Policy. Chicago: University of Chicago Press/NBER, pp. 389-418.


-J. Riedel (1984). "Trade as an Engine of Growth, Revisited". EJ; V.94-#?, pp. 56-73.


ii.. International Instiutions, Anti-Protectionist Discipline, and the Prospects for XLG


-A. Krueger and C. Michalopoulos (1985). “Developing Countries Trade Policies and the International Economic System”. in E. Preeg, ed. Hard Bargaining Ahead: US Trade Policies and Developing Countries. New Burnswick, NJ: Transaction Books, pp. 39-57.


-C. Diaz-Alejandro and G. Helleiner (1987). “Developing Countries and the Reform of the World Trading System”. in D. Salvatore, ed. The New Protectionist Threat. Amsterdam: North-Holland, pp. 505-525.


-G. Helleiner (1993). “Protectionism and the Developing Countries”. in D. Salvatore, ed. Protectionism and World Welfare. New York: Cambridge University Press, pp. 396-418.