AREC 643: Trade and Development (4 credits) Winter Department of Agricultural and Resource Economics Oregon State University

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1 AREC 643: Trade and Development (4 credits) Winter 2012 Department of Agricultural and Resource Economics Oregon State University Instructor Prof. Munisamy Gopinath Department of Agricultural and Resource Economics 212A Ballard Phone: E mail: m.gopinath@oregonstate.edu Office hours by appointment Course credits This course consists of 20 lecture periods (meets twice per week, Tuesday & Thursday, 10: am) for a total of 4 credits. Course Description: Introduction to advanced topics in modern trade theory, including technology and trade, distributional effects of trade with emphasis on regional development, trade and the environment, and multilateral trade negotiations. Applications of the above theories to specific industries are emphasized. Learning Objectives and Outcomes: At the end of this course students will be able to: describe and apply advanced economic models to contemporary issues in trade and economic development; construct and interpret economic models that are used for analyzing globalization s effects on economic development, across and within countries, and the environment; and analyze the effects of trade and development polices on consumers, workers, and businesses. Prerequisites: AREC 543, AEC 612* and AEC 625* Assessments: A third of the grade will be determined by a final take home examination. The other two thirds of the course grade are based on instructor s evaluation of in class presentations and a term paper. Each student will be asked to prepare four classroom presentations of topics related to the lectures (approximately 30 minutes each). In addition, each student is to prepare a term paper, which can also be a research proposal in the area of international trade, both in writing and for a short in class presentation. 1

2 Statement Regarding Students with Disabilities Accommodations are collaborative efforts between students, faculty and Disability Access Services (DAS). Students with accommodations approved through DAS are responsible for contacting the faculty member in charge of the course prior to or during the first week of the term to discuss accommodations. Students who believe they are eligible for accommodations but who have not yet obtained approval through DAS should contact DAS immediately at Expectations for Student Conduct (cheating policies) Oregon State University defines academic dishonesty as: An intentional act of deception in which a student seeks to claim credit for the work or effort of another person or uses unauthorized materials or fabricated information in any academic work. Academic dishonesty includes: Cheating, Fabrication, Assisting, Tampering, Plagiarism. More information, including the process by which academic dishonesty cases are handled, is available at: Books: Some of the lectures will rely heavily on select chapters from the following books. The course outline lists the relevant chapters as well as key journal articles. Dixit, A.K. and V. Norman, [DN], 1980, Theory of International Trade, Cambridge University Press. Feenstra, R., [F], 2003, Advanced International Trade: Theory and Evidence, Princeton: Princeton University Press. Helpman, E. and P.R. Krugman, [HK], 1985, Market Structure and Foreign Trade, Cambridge, MA: The MIT Press. Course Outline and Readings (percent time spent in brackets) 1. Neoclassical Trade Models (5%, week 1) F, Chapters Basic Imperfect Competition Model (refresher on material from AREC 543) (5%, week 1) F, Chapter 5 Krugman, P., 1980, Scale Economies, Product Differentiation and the Pattern of Trade, American Economic Review, 70, 950:59. 2

3 3. Trade Theory and Evidence (40%, weeks 2 5) DN, Chapter 5 Krugman, P.R., 1990, A Technology Gap Model of International Trade, In Rethinking International Trade. MIT Press, Cambridge, pp Kohli, U., 1991, Technology, Duality and Foreign Trade: A GNP Function Approach, Ann Arbor: University of Michigan Press. Trefler, D., 1993, International Factor Price Differences: Leontieff was Right! Journal of Political Economy, 101: Grossman, G. and E. Helpman, 1994, Technology and Trade. National Bureau of Economic Research, Working Paper No. 4926, Cambridge, MA. Trefler, D., 1995, The Case of Missing Trade and Other Mysteries, American Economic Review, 85: McCallum, J., 1995, National Borders Matter: Canada U.S. Regional Trade Patterns, American Economic Review, 85: Engel, C., and Rogers, 1996, How Wide is the Border?, American Economic Review, 86: Harrigan, J., 1997, Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model, American Economic Review, 87: Davis, D., and D. Weinstein, 2001, An Account of Global Factor Trade, American Economic Review, 91: Eaton, J. and S. Kortum, 2002, Technology, Geography and Trade, Econometrica, 70: Anderson, J.E. and E. van Wincoop, 2003, Gravity with Gravitas: A Solution to the Border Puzzle, American Economic Review, 93: Schott, P., 2003, One Size Fits All? Heckscher Ohlin Specialization in Global Production, American Economic Review, 93: Coughlin, C., 2004, The Increasing Importance of Proximity for Exports from U.S. States, Federal Reserve Bank of St. Louis Review, 86:1 18. Broda, C., and D.E. Weinstein, Globalization and the Gains from Variety, Quarterly Journal of Economics, 121: Cunat, A., and M. Maffezzoli, 2007, Can Comparative Advantage Explain the Growth of US Trade, Economic Journal, 117: Lai, H., and S.C. Zhu, 2007, Technology, Endowments and the Factor Content of Bilateral Trade, Journal of International Economics, 71: Amiti, M. and Konings, J., 2007, Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia. American Economic Review 97: Feenstra, R., and H.L. Kee, 2008, Export Variety and Country Productivity: Estimating the Monopolistic Competition Model with Endogenous Productivity, Journal of International Economics, 74: Helpman, E., M. Melitz and Y. Rubinstein, 2008, Estimating Trade Flows: Trading Partners and Trade Volumes, Quarterly Journal of Economics, 123: Firm Level Studies (30%, weeks 3, 4 and 5) Bernard, A.B. and J. B. Jensen, 1995, Exporters, Jobs, and Wages in U.S. Manufacturing: , Brookings Papers on Economic Activity, Microeconomics,

4 Roberts, M. and J. Tybout, 1997, The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs, American Economic Review, 87: Pavcnik, N., 2002, Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants, Review of Economic Studies, 69: Bernard, A.B. and J. B. Jensen, 2004, Why Some Firms Export, Review of Economics and Statistics, 86: Melitz, M. 2003, The Impact of Trade on Intra Industry Reallocations and Aggregate Industry Productivity, Econometrica 71(6): Helpman, E. 2006, Trade, FDI and the Organization of Firms, Journal of Economic Literature 44(3): Alessandria, G., and H. Choi, 2007, Do Sunk Costs of Exporting Matter for Net Export Dynamics, Quarterly Journal of Economics, 122: Bernard, A.B., and J.B. Jensen, 2007, Firm Structure, Multinationals and Manufacturing Plant Death, Review of Economics and Statistics, 89: Bernard, A.B., Jensen, J.B., Redding, S.J. and Schott, P.K., 2007, Firms in International Trade. Journal of Economic Perspectives, 21: Greenaway, D., R. Kneller, Firm Heterogeneity, Exporting and Foreign Direct Investment, Economic Journal, 117: Chaney, T Distorted Gravity: The Intensive and Extensive Margins of International Trade, American Economic Review, 98: Konings, J., H. Vandenbussche Heterogeneous Responses of Firms to Trade Protection, Journal of International Economics, 76: Chen, N., J. Imbs, A. Scott The Dynamics of Trade and Competition Journal of International Economics, 77: Lawless, M Firm Export Dynamics and the Geography of Trade, Journal of International Economics, 77: Redding, S.J Theories of Heterogeneous Firms and Trade, National Bureau of Economic Research, Inc, NBER Working Papers No Bernard, A.B., Jensen, J.B., Redding, S.J. and Schott, 2011 The Empirics of Firm Heterogeneneity and International Trade, Annual Review of Economics, forthcoming. Ruan, J., and M. Gopinath, 2010, Technological Convergence, Competitiveness and Welfare: A Study of International Manufacturing Industries, Journal of International Trade and Economic Development, 19: Kim, S., J. Reimer and M. Gopinath The Impact of Trade Costs on Firm Entry, Exporting, and Survival in Korea. Economic Inquiry, 49: Economic Geography and Development (20%, weeks 6 and 7) Krugman, P.R., 1991, Geography and Trade, Cambridge, MA: The MIT Press. Krugman, P.R., 1991, Increasing Returns and Economic Geography, Journal of Political Economy, 99: Henderson, J. V., Shalizi, Z. and A. J. Venables (2001) Geography and Development. Journal of Economic Geography, 1: Head, K., and J. Ries, 2001, Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S. Canada Trade, American Economic Review, 91: Baldwin, R., Forslid, R., Martin, P., Ottaviano, G.I.P. and F. Robert Nicoud, 2003, Economic Geography and Public Policy. Princeton, NJ: Princeton University Press. 4

5 Hanson, G., and C. Xiang, 2004, The Home Market Effect and Bilateral Trade Patterns, American Economic Review, 94: Syverson, C Market Structure and Productivity: A Concrete Example. Journal of Political Economy. 112: Rossi Hansberg, E, 2005, A Spatial Theory of Trade, American Economic Review, 95: Baldwin, R., T. Okubo Heterogeneous Firms, Agglomeration and Economic Geography: Spatial Selection and Sorting, Journal of Economic Geography, 6: Syverson, C Prices, Spatial Competition and Heterogeneous Producers: An Empirical Test. Journal of Industrial Economics, 55: Melitz, M. and G.I.P. Ottaviano, 2008, Market Size, Trade, and Productivity. Review of Economic Studies. 75: Vigfusson, R. 2008, How Does the Border Affect Productivity? Evidence from American and Canadian Manufacturing Industries, Review of Economics and Statistics, 90: Altomonte, C., I. Colantone Firm Heterogeneity and Endogenous Regional Disparities, Journal of Economic Geography, 8: Henderson, J.V Cities and Development, Journal of Regional Science, 50: o A version printed as Evaluating China s Urbanization Experience, Chapter 3 in M. Gopinath and H. Kim (editors), Globalization and the Rural Urban Divide, Seoul National University Press, Saito, H., and M. Gopinath, 2009, Plants Self Selection, Agglomeration Economies and Regional Productivity in Chile, Journal of Economic Geography, 9: Saito, H., M. Gopinath and J. Wu Heterogeneous Firms, Trade Liberalization and Agglomeration. Canadian Journal of Economics, 44: International Development Davis, D., and D. Weinstein, 2003, Market Access, Economic Geography and Comparative Advantage: An Empirical Test, Journal of International Economics, 59:1 23. Redding, S., and A. J. Venables, 2003, Economic Geography and International Inequality, Journal of International Economics, 62: Meier, G.M., and J. E. Rauch, 2005, Leading Issues in Economic Development, Oxford University Press. Nallari, R., and B. Griffith, 2011, Understanding Growth and Poverty, The World Bank. 5. Environment and Trade (20%, weeks 8 and 9) Copeland, B. and M.S. Taylor, 1994, North South Trade and the Environment, Quarterly Journal of Economics, 109: Chichilnisky, G., 1994, North South Trade and the Global Environment, American Economic Review, 84: Grossman, G., and A.B. Krueger, 1995, Economic Growth and the Environment, Quarterly Journal of Economics, 110: Bagwell, K., and R.W. Staiger, 2001, Domestic Policies, National Sovereignty, and International Economic Institutions, Quarterly Journal of Economics, 116: Antweiler, W., Copeland, B. and M.S. Taylor, 2001, Is Free Trade Good for the Environment? American Economic Review, 91:

6 D.C. Esty, 2001, Bridging the Trade Environment Divide, Journal of Economic Perspectives, 15: Copeland, B.R. and M.S. Taylor, 2003, Trade and the Environment. Theory and Evidence. Princeton: Princeton University Press. Copeland, B. and M.S. Taylor, 2004, Trade, Growth and the Environment, Journal of Economic Literature, 42: Copeland, B. and M.S. Taylor, 2005, Free Trade and Global Warming: A Trade Theory View of the Kyoto Protocol, Journal of Environmental Economics and Management, 49: Kellenberg, D. 2009, An empirical investigation of the pollution haven effect with strategic environment and trade policy, Journal of International Economics 78 (2009) Levinson, A. 2009, Technology, International Trade, and Pollution from US Manufacturing, American Economic Review, 99: Muller, N.Z., R. Mendelsohn, and W. Nordhaus, Environmental Accounting for Pollution in the United States Economy, American Economic Review 101: Brock, W.A. and S.M. Taylor The Green Solow Model. Journal of Economic Growth, forthcoming. Waldkirch, A. and M. Gopinath, 2008, Pollution Control and Foreign Direct Investment in Mexico: An Industry Level Analysis, Environmental and Resource Economics, 41: Multilateral Trade Negotiations (10%, week 10) Bagwell, K., and R.W. Staiger, 1999, An Economic Theory of GATT, American Economic Review, 89: Bagwell, K., and R.W. Staiger, 2004, Multilateral Trade Negotiations, Bilateral Opportunism and the Rules of GATT/WTO, Journal of International Economics, 63: Rose, A.K., 2004, Do We Really Know that WTO Increases Trade? American Economic Review, 94: Horn, H. 2006, National Treatment in the GATT, American Economic Review, 96: Goldberg, P.K. and N. Pavcnik, 2007, Distributional Effects of Globalization in Developing Countries, Journal of Economic Literature, 45: Selected readings from o Douglas Irwin, Free Trade Under Fire, Princeton University Press 2002 o Jagdish Bhagwati, Free Trade Today, Princeton University Press 2002 o Joseph Stiglitz, Globalization and its Discontents, W.W. Norton and Co, Agriculture and the WTO, Orden, D., D. Blandford and T. Josling (Editors), WTO Disciplines on Agricultural Support: Seeking a Fair Basis for Trade. Cambridge University Press, UK. o Chapter 8, India s Agricultural Support (M. Gopinath) 6