Economics 242

International Trade

John Stiver

Room 3.61

Phone: 251-8433

Email: jstiver@stamford.uconn.edu

Web: www.sp.uconn.edu/~jstiver

Office Hours: Tuesday & Thursday: 2:30 – 4:30 or by Appt.

Textbooks:

Other Sources:

Grading: There will be three midterms given during the semester (approximately once a month), a cumulative final given during finals week, and weekly homework assignments. To determine your grade, you have two options:

    1. Drop your lowest midterm grade

    Midterms = 40%

    Final = 40%

    Homework = 20%

               2. Use all three midterm grades

Midterms = 60%

Final = 20%

Homework = 20%

Academic Misconduct: Academic misconduct in any form is in violation of the University Student Conduct Code and will not be tolerated. This includes, but is not limited to, copying or sharing answers on tests or assignments, plagiarism,, and having someone else do your academic work. Depending on the act, a student could receive an F grade on the test/assignment, F grade for the course, or could be suspended or expelled.

I: Introduction

Why do countries trade with each other? In a nutshell, because they are different. Most of these differences are found in countries’ abilities to produce goods and services. These differing abilities are the result of such things as factor endowments, technological know-how, market structure, public policy, and so on. Understanding why a country trades is a vital step in understanding the consequences of trade.

II: General Equilibrium Models & The Gains from Trade

Unfortunately, to understand why countries trade, we need to get a handle on the relationships between a country’s technology, preferences, and factor endowments, and that country’s production patterns and prices. This necessarily involves general equilibrium theory (the simultaneous interaction of several markets). In this section, we will work through a basic general equilibrium model and use it to identify the gains from trade. The tools developed in this section will be used repeatedly. It would be wise to learn them!

 

III: Models of International Trade

In this section, we will look at a variety of models of international trade. Each model is unique in that it focuses on a different cause of trade between countries. The first of these, the Ricardian Model, should look familiar – it is often taught in introductory classes. It concentrates on technological differences. From there we move on to differences in factor supplies (H-O and Specific Factors). Finally, we will cover some of the "New Trade" theory that emphasizes market structure and increasing returns to scale.

 

IV: International Economic Policy

To this point, we’ve looked at the two extremes: no trade (autarky) and free trade. Now we will venture in the "gray area" in between – protected trade. A country has many different tools to prevent or restrict trade – tariffs and quotas are the most common. In this section, we will see that the optimal trade policy relies heavily on the underlying reasons behind trade.

V: Trade in Factors and Foreign Direct Investment

In this section re relax the traditional assumption of trade models – that factors of production are immobile between countries. We can basically identify two types of factor movement: labor (migration) and capital (foreign direct investment).

 

Warning: For entertainment purposes only. All dates and topics are subject to change. May cause drowsiness. Do not use while operating heavy machinery.