Department of Economics

ECON 641

SYLLABUS - Revised
Winter 2008
Alan Deardorff

Text Requirements Schedule Contacts Readings

Prerequisite: Econ 601 and 603
Organization: The course meets twice a week, Mondays and Wednesdays, 2:30 - 4:00 PM, 3240 Weill.


    The textbook for the course is

    In addition to the textbook, the course will draw mostly on lectures, journal articles, and working papers.

    If you intend to specialize in international trade, I strongly suggest that you purchase the following books for your library:

      Dixit, Avinash K. and Victor Norman 1980 Theory of International Trade, Cambridge Univ. Press.

      Helpman, Elhanan and Paul Krugman, 1986 Market Structure and Foreign Trade, MIT Press.

      Leamer, Edward, ed., 2001 International Economics, Worth Publishers.

    Aside from the Feenstra textbook, readings for the course will mostly be separate papers, and these will be available from various sources. Many can now be found on the web, with links that are contained in this online syllabus. Click on "Online". Other published items and some unpublished ones are not on the web, and these will be put in a coursepack produced by Grade A Notes Copy Center and available at the Michigan Union Bookstore.

    Although I try to provide links to online assigned readings here, you may want to browse the following sites that include lots of articles and papers on international trade:

      (for articles in leading journals through the mid-1990s)

      (for recent articles especially in Elsevier (North Holland) journals including the Journal of International Economics)

      (for NBER working papers)


    Requirements for the course consist of a series of problem sets that will not be graded, a term paper, and a final exam. The term paper and final exam will each count 45% of your grade for the course. The remaining 10% will cover your participation in class and in the international seminar, which you are also expected to attend when it meets. It will meet weekly, Thursdays 11:40-1:00, starting in March. See the online seminar schedule.




NOTE: The dates on this outline are not intended to be binding, but only suggestive. I would prefer, to some extent, that we take whatever time is needed to cover topics well, rather than rush to get through everything. It follows that we probably will not get to all of the topics that are listed here, and that we may skip over some.

1.Overview of World Trade Jan 7
Baldwin, R. and P. Martin. 1999. "Two Waves of Globalization: Superficial Similarities, Fundamental Differences," NBER Working Paper No. 6904. Online-NBER
Feenstra, R.C. 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives 12(4): 31-50, Autumn. Online-JSTOR
Irwin, D.A. 1996. "The United States in a New Global Economy? A Century's Perspective," American Economic Review 86(2): 41-46, May. Online-JSTOR
I.Trade Theory with Perfect Competition
2.International EquilibriumJan 9
Deardorff, A.V. "Trade and Transformation Curve Diagram," in Terms of Trade: Glossary of International Economics, World Scientific, pp. 343-349. Online-Glossary
Deardorff, A.V. "Offer Curve," in Terms of Trade: Glossary of International Economics, World Scientific, pp. 322-330. Online-Glossary
3.Gains from TradeJan 14
Feenstra, Chap. 6, pp. 174-188.
Dixit and Norman, pp. 65-80. coursepack
Ohyama, M. 1972. "Trade and Welfare in General Equilibrium," Keio Economic Studies 9: 37-73. coursepack
Irwin, Douglas A. 2005. "The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807-09," Review of International Economics 13(4), pp. 631-645. Online-Dartmouth
4.Comparative AdvantageJan 16
Deardorff, A.V. 1980. "The General Validity of the Law of Comparative Advantage," Journal of Political Economy 88(5): 941-957, October. Online-JSTOR
Bernhofen, D.M. and J.C. Brown. 2004. "A Direct Test of the Theory of Comparative Advantage: The Case of Japan," Journal of Political Economy 112(1), pp. 48-59, February. Online-Chicago
Deardorff, A.V. 1994. "Exploring the Limits of Comparative Advantage," Weltwirtschaftliches Archiv, 130: 1-19. Online-DIGI

***** No Class Jan 21: MLK Day *****
5,6.The Ricardian ModelJan 23, 28
Feenstra, pp. 1-4.
Dornbusch, R., S. Fischer, and P.A. Samuelson. 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review 67: 823-839, December. Online-JSTOR
Eaton, Jonathan and Samuel Kortum. 2002. "Technology, Geography, and Trade," Econometrica 70(5): 1741-1779, September. Online-JSTOR
7,8. The Heckscher-Ohlin ModelJan 30, Feb 4
Feenstra, pp. 4-30
Jones, R.W. 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, 73: 557-572, December; also in Leamer (2001). Online-JSTOR
Deardorff, A.V. 1979. "Weak Links in the Chain of Comparative Advantage," Journal of International Economics 9: 197-209. Online-SciDir
9.Theorems of the H-O ModelFeb 6
Deardorff, A.V. 1994. "The Possibility of Factor Price Equalization, Revisited," Journal of International Economics 36, 167-175. Online-SciDir
10.The H-O Model in Higher DimensionsFeb 11
Feenstra, Chap. 3
Deardorff, A.V. 1982. "The General Validity of the Heckscher-Ohlin Theorem," American Economic Review 72: 683-694, September. Online-JSTOR
Ethier, W.J. 1984. "Higher Dimensional Issues in Trade Theory," in R.W. Jones and P.B. Kenen, eds., Handbook of International Economics Vol. I, North-Holland, 131-184. Online-SciDir
II.Empirical Performance of the H-O Models
11.The HOV Theorem and the Leontief ParaadoxFeb 13
Feenstra, Chap. 2
Leamer, E.E. 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy 88: 495-503; also in Leamer (2001). Online-JSTOR
Brecher, R. and Choudri, E. 1982. "The Leontief Paradox, Continued," Journal of Political Economy 90: 820-823. Online-JSTOR
12. Tests of HOV and H-OFeb 18
Trefler, D. 1995. "The Case of the Missing Trade and Other HOV Mysteries," American Economic Review 85: 1029-1046; also in Leamer (2001). Online-JSTOR
Davis, D. and D. Weinstein. 2001. "An Account of Global Factor Trade," American Economic Review 91(5): 1423-1453. Online-JSTOR
Morrow, P.. 2006. "East is East and West is West: A Ricardian-Heckscher-Ohlin Model of Comparative Advantage," U of M Job Market Paper. Online-RSIE
III.Trade and Factor Prices
13.The Stolper-Samuelson TheoremFeb 20
Deardorff, A.V. 1994. "Overview of the Stolper-Samuelson Theorem," in A.V. Deardorff and R.M. Stern, eds., The Stolper-Samuelson Theorem: A Golden Jubilee, University of Michigan Press, 7-34. coursepack

***** Winter Break: Feb 25-29 *****
14.The Specific-Factors ModelMar 3
Neary J.Peter 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal 88: 488-510, September; also in Leamer (2001). Online-JSTOR
15.Trade and WagesMar 5
Feenstra, Chap. 4
Deardorff, Alan V. and Dalia Hakura. 1994. "Trade and Wages -- What Are the Questions?" In Jagdish Bhagwati and Marvin H. Kosters, eds., Trade and Wages: Leveling Wages Down? Washington, D.C.: The AEI Press, 76-107. Online-RSIE
Deardorff, A.V. and R.W. Staiger. 1988. "An Interpretation of the Factor Content of Trade." Journal of International Economics 24: 93-107. Online-SciDir
IV.New Trade Theory and Empirics
16.External Economies of Scale and TradeMar 17
Ethier, W.J. 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica 30(5): 1243­1268. Online-JSTOR
17.Models of Intra-Industry TradeMar 17, 19
Feenstra, Chap 5, pp. 137-144
Krugman, P.R. 1979. "Increasing Returns, Monopolistic Competition, and International Trade," Journal of International Economics 9: 469­479; also in Leamer (2001). Online-SciDir
Krugman, P.R. 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review 70: 950-959; also in Grossman (1992). Online-JSTOR
Brander, J. and P.R. Krugman. 1983. "A 'Reciprocal Dumping' Model of International Trade," Journal of International Economics 15: 313­321; also in Leamer (2001) and in Grossman (1992). Online-SciDir
17.Extra Class?Mar 20
18.Combining Inter- and Intra-Industry TradeMar 24
Romalis, J. 2004. "Factor Proportions and the Structure of Commodity Trade ." American Economic Review 94:1 67-97. Online-JSTOR
Helpman and Krugman, Ch. 6-8. coursepack
19,20.The Gravity Equation and Empirical Work on IRS ModelsMar 26
Feenstra, Chap. 5, pp. 144-169
Hummels, D. and J. Levinsohn. 1995. "Monopolistic Competition and International Trade: Reconsidering the Evidence." Quarterly Journal of Economics 110: 799-836; also in Leamer (2001). Online-JSTOR
Debaere, Peter. 2005. "Monopolistic competition and trade, revisited: testing the model without testing for gravity," Journal of International Economics 66(1), pp. 249-266. Online-SciDir
Deardorff, A.V. 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?" In J.A. Frankel, ed., The Regionalization of the World Economy, University of Chicago Press, 7-32. Online-RSIE
Engel, Charles and John H. Rogers. 1996. "How Wide Is the Border?" American Economic Review 86: 1112-1125; also in Leamer (2001). Online-JSTOR
Anderson, J.A. and E. van Wincoop. 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review 93(1), pp. 170-192. Online-JSTOR
21a.Extra Class?Mar 27
V.Trade Policy
21.Trade Policy with Perfect CompetitionMar 31
Feenstra, Chap. 6, pp. 188-192, Chap 7, pp. 209-220
Deardorff, Alan V. "Tariff in Partial Equilibrium." In Terms of Trade: Glossary of International Economics, World Scientific, pp. 335-342. Online-Glossary
Lerner, A.P. 1936. "The Symmetry between Import and Export Taxes," Economica 3(11): 306-313, August. Online-JSTOR
22.Distortions and the Second BestMar 31
Krishna, P. and A. Panagariya. 2000. "A Unification of Second Best Results in International Trade" Journal of International Economics 52(2), 235-257. Online-SciDir
23.Trade Policies with Imperfect CompetitionApr 2
Feenstra, Chap. 7, pp. 220-251
Dixit, A. 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal: Supplement 94: 1-16. Online-JSTOR
24.Preferential Trading ArrangementsApr 7
Feenstra, Chap. 6, pp. 192-200.
Bhagwati, J. 2008. "Why PTAs are a Pox on the World Trading System," Chap. 3 in Termites in the Trading System, Oxford University Press. coursepack
VI.Heterogeneous Firms
25.How Firms DifferApr 9
Bernard et al. 2007. "Firms in International Trade," Journal of Economic Perspectives, forthcoming. Online-Dartmouth
Melitz, M.. 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity", Econometrica 71(6), November, pp. 1695-1725. Online-JSTOR
26.Review and Catch UpApr 14
***** Final Exam: Mon, Apr 21, 1:30-3:30 PM *****