International Trade: Theory and Policy

Ects : 3
Compétence à acquérir :
After having attended the classes, the students will be able to assess the determinants of trade between similar countries, the impact of trade on entry and exit of firms and on aggregate productivity. They will also have acquired the ability to discuss the policy implications in terms of trade policy. A careful reading of dedicated research papers will also give them the ability to understand and discuss the recent literature on these issues.

Description du contenu de l'enseignement :
The course will focus on the most recent theories of trade which are relevant for research on and analysis of the determinants and impacts of globalization, trade patterns, and trade policy. These theories allow to understand trade based on economies of scale and to analyse modern trade patterns (including intra-branch trade, offshoring, trade in intermediates, services trade), the gains from trade, and the use of trade policy instruments by governments. Part of the course will be devoted to empirical tests of these theories.
The objective of the course is to become familiar with the more recent theories of trade, new gains from trade, and trade policy. The course will cover models of trade of differentiated products, starting with Krugman’s model and covering Melitz’s model with firm heterogeneity in detail. It will also discuss alternative forms of imperfect competition (oligopolistic competition) and their consequences for trade. It will then cover political economy models of trade, which aim to explain the formation of trade policy as a result of divergent domestic interests. Finally, we will study how trade costs impact the level of trade, using the gravity model and studying its theoretical foundations and the empirical methods to estimate it.