NORTH SOUTH UNIVERSITY

DEPARTMENT OF ECONOMICS
ECO 611 International Trade Theory
Fall 2015
Professor: Dr. M. Ismail Hossain (MIH)
Email: ismail.hossain@northsouth.edu
Class Meeting: Thursday 7:00 10:10 PM; Room No. NAC 401
Office: NAC 801
Office Hour: ST: 9:00-11:00 AM; MW 3:00-4:00 PM (or by appointment)

Required Textbook
Markusen, James R., James R. Melvin, William Kaempfer and Keith E. Maskus, International
Trade Theory and Evidence. Mcgraw-Hill 1995 (MMKM)
Supplementary Textbooks
Robert C. Feenstra, Advanced Trade Theory, Princeton University Press, Princeton, 2004 (RCF)
Gandolfo, Giancarlo, International Trade Theory and Policy, Springer, Second edition, 2014
(GG)

Evaluation
Midterm Exam (2) : 60 percent
Final Exam: 40 percent
Important: Switch off your mobile phone during the class. Do not text message either. No
internet or facebook scanning. Do not bring your mobile in the exam. Do not gossip in the class.
After attending this course, the student:
*is able to explain the assumptions, derivations and implications of the main and recent
international trade theories.
* is able to explain influential and recent empirical evidence on international trade.
* is able to analyze and evaluate trade policy (instruments).

Topics
1. Introduction
a. Review of producer theory (MMKM Ch. 2)
b. Review of consumer theory and welfare (MMKM Ch. 3)
c. Causes of international trade: No trade model (MMKM Ch.6)
2. Factor proportions models of trade
a. Heckscher-Ohlin (Samuelson) model
b. Heckscher-Ohlin-Vanek model
c. Core theorems
MMKM Ch. 8, Appendix 3; GG Ch. 4 and 5
**Bowen H., Leamer, E., Sveikauskas, L. (1987) Multicountry, Multifactor Tests of the Factor
Abundance Theory The American Economic Review, Vol. 77, No. 5, pp. 791-809
**Davis and Weinstein (2001) An Account of Global Factor Trade, The American Economic
Review, Vol. 91, No. 5, pp. 1423-1453
**Trefler (1993) International Factor Price Differences: Leontief was Right! The Journal of
Political Economy, Vol. 101, No. 6, pp. 961-987
**Trefler (1995) The Case of the Missing Trade and Other Mysteries, The American
Economic Review, Vol. 85, No. 5, pp. 1029-1046
*Deardorff, A. (1982) The General Validity of The Heckscher-Ohlin Theorem, The American
Economic Review, Vol. 72, No. 4,
3. Empirical tests of trade patterns
(MMKM Ch. 13; RCF Ch. 2, 3, 4; GG Ch. 4)
4. Trade with imperfect Competition and Increasing Returns
a. Imperfect competition with constant returns to scale
b. Imperfect competition and increasing returns to scale

c. Monopolistic competition model of trade

(MMKM Ch. 11, 12; GG Ch. 9)
**Krugman (1979) Increasing Returns, Monopolistic Competition, and International
Trade Journal of International Economics Vol 15. Pp. 313-321
**Krugman (1980) Scale Economies, Product Differentiation, and the Pattern of
Trade, The American Economic Review, Vol. 70, No. 5 (Dec., 1980), pp. 950-959
5. Gravity model of trade
(RCF p. 144-163)
* Anderson, J. and E. van Wincoop, Gravity with Gravitas: A Solution to the Border
Puzzle, American Economic Review, 2003, 170-192.
* Santos Silva, J. and Tenreyro, S. ``The Log of Gravity", Review of Economics and
Statistics, Vol. 88, No. 4, Pages 641-658.
6. Trade with heterogeneous firms
* Melitz, Marc (2003). "The Impact of Trade on Intra-Industry Reallocations and Aggregate
Industry Productivity," Econometrica, 71(6), p.1695-1725.
** Melitz, Marc and Gianmarco Ottaviano (2008). "Market Size, Trade and Productivity,"
Review of Economic Studies, vol. 75(1), pages 295-316, 01.
** Eaton, Jonathan, Samuel Kortum and Francis Kramarz (2004b). "Dissecting Trade: Firms,
Industries, and Export Destinations," American Economic Review P&P, 94, p.150-154.
** Helpman, Elhanan, Marc Melitz and Yona Rubinstein (2008). "Estimating Trade Flows:
Trading Partners and Trading Volumes," Quarterly Journal of Economics, forthcoming.
** Pavcnik, N. (2002), Trade Liberalization, Exit,and Productivity Improvements: Evidence
from Chilean Plants, Review of Economic Studies 69, January, pp. 245-76.
** Bernard, Jensen, Redding, and Schott (2007) Firms in International Trade Journal of
Economic Perspectives, vol. 21 pp. 105-130
**Levinsohn (1999) Employment Responses to International Liberalization in Chile, Journal
of International Economics, Vol. 47 April, pp. 321-344

**Melitz (2003) The Impact of Trade on Intra-Industry Reallocations and Aggregate

Productivity, Econometrica Vol. 71 No. XXX pp. 1695-1725
**Trefler (2004) The Long and Short of the Canada-U.S. Free Trade Agreement, American
Economic Review, Vol. 94, No. XXX, pp.870-895
** Melitz and Redding (2012) Heterogeneous Firms and Trade, in Handbook of International
Economics, 4th edition, forthcoming (available at http://scholar.harvard.edu/melitz/publications)
7. Trade policy
(MMKM Ch. 15, 16; GG Ch. 10)
Bagwell, Kyle, and Robert W. Staiger. 1999. An
American Economic Review, 89(1): 21548.

Economic Theory of GATT.

** Broda, C, N Limao and D. Weinstein, Optimal Tariffs and Market Power: The
Evidence American Economic Review, 2008
* Koujianou Goldberg, P. and G. Maggi, Protection for Sale: An Empirical
Investigation, American Economic Review 89(5): 1135-55, December 1999.
* Grossman, G.M. and E. Helpman, Protection for Sale, American Economic Review,
September 1994, 84(4), 833-50.
Other topics (Time permitting)
8. International Factor Movements
a. Migration
b. Foreign direct investment
(MMKM Ch. 21-22; GG Ch.6)
Aitken, B. and Harrison, A. (1999), "Do Domestic Firms Benefit from Direct
Foreign Investment? Evidence from Venezuela", American Economic Review, Vol.
89.
**Markusen (1995) The Boundaries of Multinational Enterprises and International
Trade, The Journal of Economic Perspectives, Vol. 9, No. 2, pp. 169-189
** Helpman, Melitz, and Yeaple (2004) Exports versus FDI with Heterogeneous
Firms, American Economic Review, Vol. 94, No. 1. pp 300-316

9. Trade integration and wage inequality

(GG Ch. 17)
**Verhoogen (2008) Trade, Quality Upgrading and Wage Inequality in the Mexican
Manufacturing Sector The Quarterly Journal of Economics, Vol. 123, No. 2, pp 489530.
*Golberg and Pavcnik (2007) Distributional Effects of Globalization in Developing
Countries, Journal of Economic Literature, Vol. 45, No. 1, pg. 39-82