G6910 Topics in Economic Geography Fall 2003 David E. Weinstein

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1 G6910 Topics in Economic Geography Fall 2003 David E. Weinstein This course seeks to understand the empirical determinants of the pattern and volume of international trade. This course assumes familiarity with international trade theory at the Ph.D. graduate level (e.g. G6903). While it will traverse many similar areas, it will be distinctive in its focus on the empirical analysis of these topics. Students enrolled in the course will be required to write a paper that is due at the last class session without fail. The paper should replicate the results of a published paper on the reading list, check for robustness and do one economically interesting extension. Textbooks Feenstra, Robert C., Advanced International Trade: Theory and Evidence, Princeton University Press, forthcoming 2004, pdf s of chapters available at: Harrigan, James and E. Kwan Choi (eds.), The Handbook of International Trade, Malden, MA: Blackwell, Helpman, E. and Krugman, P., Market Structure and Foreign Trade, MIT Press, Cambridge, MA. I. Introductory Davis, Donald R. and David E. Weinstein, What Role for Empirics in International Trade? in Ronald Findlay, Lars Jonung, Mats Lundahl, eds., Bertil Ohlin: A Centennial Celebration, , Cambridge: MIT Press, Leamer, Edward (1994) Testing Trade Theory, Surveys in International Trade, ed. by David Greenaway and L.Alan Winters, Basil Blackwell, pp Leamer, Edward E. and Levinsohn, James. International Trade Theory: The Evidence, in Grossman, Gene and Kenneth Rogoff, eds. Handbook of International Economics, New York: Elsevier, Vol. III, Helpman, Elhanan (1999) The Structure of Foreign Trade, Journal of Economic Perspectives, 13(2), pages

2 II. Factor Endowments A. Heckscher-Ohlin-Vanek: Factor Service Trade Overviews Davis, Donald R. and David E. Weinstein, (2002), The Factor Content of Trade, in J. Harrigan and K. Choi (eds.), Handbook of International Trade, Basil Blackwell. Feenstra Text chapters 2 and 3. Helpman and Krugman Text Chapters 1, 7, and 8. Early Papers Bowen, Harry P., Leamer, Edward E., and Sveikauskas, Leo. Multifactor, Multicountry Tests of the Factor Abundance Theory, American Economic Review, December 1987, 77, pp Trefler, Daniel. International Factor Price Differences: Leontief Was Right! Journal of Political Economy, December 1993, 101, pp Trefler, Daniel. The Case of the Missing Trade and Other Mysteries, American Economic Review, 1995, 85, pp Extensions and Rebuttals DeBaere, Peter, Relative Factor Abundance and Trade, Journal of Political Economy, 2003, p Gabaix, Xavier (1997) The Factor Content of Trade: A Rejection of the Heckscher- Ohlin-Leontief Hypothesis, Harvard University, mimeo. Abandoning the Integrated Equilibrium Approach Davis, Donald R., David E. Weinstein Scott Bradford, and Kazushige Shimpo, Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works American Economic Review, June Davis, Donald R. and David E. Weinstein, An Account of Global Factor Trade American Economic Review, December Schott, P. K. (2002), Across-Product versus Within-Product Specialization in International Trade, mimeo (revised version of NBER working paper No. 8492). Downloadable at 2

3 Davis, Donald R. and David E. Weinstein, Do Factor Endowments Matter for North- North Trade? NBER Working Paper #8516, October Krishna, Pravin and Yong-Seok Choi, The Factor Content of Bilateral Trade: An Empirical Test, Journal of Political Economy, Forthcoming. Reimer, Jeffrey Global Production Sharing and Trade in the Services of Factors, mimeo, Wisconsin (2003). B. Patterns of Production and Trade with FPE (Actual or Adjusted) International Patterns of Production and Trade Leamer, E. (1984) Sources of International Comparative Advantage: Theory and Evidence. Cambridge: The MIT Press. ters_feb03/sources.htm Harrigan, J. (1997) Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model, American Economic Review. Leamer E. (1987) Paths of Development in the Three-Factor, n-good General Equilibrium Model, Journal of Political Economy, 95, pages Schott, P. One Size Fits All? Heckscher-Ohlin Specialization in Global Production American Economic Review 93(2): (June 2003). Romalis, John (2002) Factor Proportions and the Structure of Commodity Trade Mimeo, Chicago GSB. Patterns of Absorption Harrigan, James The Volume of Trade in Differentiated Intermediate Goods: Theory and Evidence, 1995, The Review of Economics and Statistics, v. 77 no. 2 (May) Hunter, Linda and Markusen, James. Per-Capita Income as a Determinant of Trade, in Feenstra, Empirical Methods for International Trade, 1989, Hunter, Linda. The Contribution of Nonhomothetic Preferences to Trade, Journal of International Economics, May 1991,

4 Regional Patterns of Production and the Question of FPE Within a Country Bernstein, J. R. and D. E. Weinstein, (2001), Do endowments predict the location of production?, Journal of International Economics 56, Bernard, Andrew and Peter Schott, Factor Price Equality and the Economies of the United States, mimeo, Dartmouth Tuck School and Yale GSM, November Hanson, Gordon, and Matthew Slaughter, Labor-Market Adjustment in Open Economies: Evidence from U.S. States, Journal of International Economics, 57(2002): Joelle Saad, Do Local Relative Factor Supplies Affect Local Relative Factor Prices? mimeo, Columbia University, III. Gravity and the Volume of Trade Overview Harrigan, J. (2002), Specialization and the Volume of Trade: Do the Data Obey the Laws?, in J. Harrigan and K. Choi (eds.), The Handbook of International Trade, Basil Blackwell. Obstfeld, Maury, and Kenneth Rogoff The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? NBER Macroeconomics Annual, 15 (2000). Principles Feenstra, Chapter 5. Anderson, J.E., A theoretical foundation for the gravity equation. American Economic Review 69: 1, pp Deardorff, A.V., Determinants of bilateral trade flows: Does gravity work in a neoclassical world? in: Frankel, J.A., Editor,, The Regionalization of the World Economy, The University of Chicago Press, Chicago, pp Eaton, Jonathan and Samuel Kortum, Technology, Geography, and Trade Econometrica, 70(5), 2002, Helpman, Elhanan Imperfect competition and international trade: Evidence from fourteen industrial countries, Journal of the Japanese and International Economies, 1987,

5 The Gravity Model and Tests of Trade Theories Hummels, D. and Levinsohn, J., Monopolistic competition and international trade: Reconsidering the evidence. Quarterly Journal of Economics 110: 3, pp Antweiler, W. and D. Trefler (2002), Increasing returns and all that: A view from trade, American Economic Review 92, Debaere, Peter, Testing New Trade Theory, mimeo, University of Texas. Evenett, S. J. and W. Keller (2002), On theories explaining the success of the gravity equation, Journal of Political Economy 110, Growth of World Trade Volumes Baier, S.L. / Bergstrand, J.H., The growth of world trade: tariffs, transport costs, and income similarity Journal of International Economics, Feb Hummels, David, Jun Ishii and Kei-Mu Yi, The Nature and Growth of Vertical Specialization in World Trade, Journal of International Economics 54 (2001) Yi, Kei-Mu, Can Vertical Specialization Explain the Growth of World Trade?, Journal of Political Economy, February Krugman, P Growing world trade: Causes and consequences, Brookings Papers on Economic Activity (1), Harrigan, James (1994) Scale Economies and the Volume of Trade, Review of Economics and Statistics, 76:2. Davis, Donald R. and David E. Weinstein, The Mystery of the Excess Trade (Balances) American Economic Review Papers and Proceedings, May Davis, Donald R. and David E. Weinstein, A New Approach to Bilateral Trade Patterns and Balances, mimeo, Columbia University Hummels, David and Peter Klenow, The Variety and Quality of a Nation's Trade (NBER 8712) Hummels, David Toward a Geography of Trade Costs mimeo, Purdue, September Redding, Stephen and Anthony J. Venables (2003) Geography and Export Performance: External Market Access and Internal Supply Capacity NBER Working Paper #

6 Border Puzzles McCallum, John, National Borders Matter: Canada-U.S. Regional Trade Patterns, American Economic Review, Vol. 85 (3) pp Anderson, J. E. and E. van Wincoop (2002), Borders, Trade and Welfare, Brookings Trade Forum Downloadable at Anderson, J. E. and E. van Wincoop (2003), Gravity with Gravitas: A Solution to the Border Puzzle, American Economic Review, March. Evans, Carolyn (2003) Forthcoming, American Economic Review. Feenstra, R. C. (2002), Border Effects and the Gravity Equation: Consistent Methods for Estimation, Scottish Journal of Political Economy 49, Wei, Shang-Jin Intra-National versus International Trade: How Stubborn are Nations in Global Integration? NBER working paper 5531 Apr Wolf, Holger Intra-National Home Bias in Trade ; forthcoming, The Review of Economics and Statistics. Hillberry, Russell and David Hummels (2002) Intra-national Home Bias: Some Explanations (NBER 9022) Hillberry, Russell and David Hummels (2002) Explaining Home Bias in Consumption: The Role of Intermediate Input Trade (NBER 9020). Applications of Gravity Frankel, Jeffrey A., David Romer, Does Trade Cause Growth?, American Economic Review, Vol. 89 (3) pp Krishna, Pravin, Are Regional Trading Partners 'Natural'?, Journal of Political Economy, Redding, Stephen, and Anthony Venables, Economic Geography and International Inequality, revised version (April 2003) of CEPR Discussion Paper, Evans, Carolyn, and James Harrigan, Distance, Time, and Specialization, NBER Working Paper # 9729,

7 IV. Geography Surveys Overman, Henry, Stephen Redding and Anthony Venables The Economic Geography of Trade, Production and Income: A Survey of Empirics, Handbook of International Trade, (eds) E Kwan-Choi and J Harrigan, Basil Blackwell, , Head, K. and T. Mayer (2003), The Empirics of Agglomeration and Trade, mimeo. Downloadable at Home Market Effects Davis, D. R. and D. E. Weinstein (2003), Market Access, Economic Geography and Comparative Advantage: An Empirical Assessment, Journal of International Economics 59, Davis, D. R. and D. E. Weinstein Economic Geography and Regional Production Structure: An Empirical Investigation, European Economic Review, February Feenstra, Robert, James Markusen, and Andrew Rose (1999) Understanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods, NBER Working Paper. Hanson, G. and Xiang, C. (2002), The Home Market Effect and Bilateral Trade Patterns NBER Working Paper No Head, Keith and John Ries, Increasing Returns Versus National Product Differentiation as an Explanation for the Pattern of US-Canada Trade, American Economic Review, Brulhart, Marius and Federico Trionfetti, (2001) A Test of Trade Theories When Expenditure is home-biased, mimeo November Locational Fundamentals Davis, D. R. and D. E. Weinstein (2002), Bones, Bombs and Break Points: The Geography of Economic Activity, American Economic Review 92. Davis, D. R. and D. E. Weinstein (2003), A Search for Multiple Equilibria in Urban Industrial Structure, mimeo, Columbia University. Rappaport, Jordan and Jeff Sachs, The United States as a Coastal Nation, Journal of Economic Growth, Vol. 8, No. 1, pp. 5-46, March