MINT002: Trade and Development
MINT002: Trade and Development
Trade and Development
MINT002- Fall - Course - 6 ECTS
Thursday 10:15-12:00 (S4)
Prof. : Nicolas Berman, nicolas.berman – at – graduateinstitute.ch
Office hours: Tuesdays 16:00-18:00
Course Description
Development, trade and their interlinkages are among the most controversial topics of today. Economics has much to say concerning these issues, and constitutes a powerful tool in terms of debunking commonly held misperceptions. This course will consider a number of topics associated with the links between international trade and development. A particular emphasis will be placed on the consequences of trade openness on outcomes in developing countries, i.e. on inequalities, growth and poverty, institutions and financial development, the impact of export instability and countries’ specialization, terms of trade, and the environment.
The course is applied-oriented: after reviewing basic theories associated with each topic, each session will involve presentations of recent empirical papers. By the end of the course, it is hoped that participants will be able to intelligently read and critically assess policy documents on the topics covered that are commonly produced by international institutions.
Textbooks / pre-requisite
The course does not follow any existing textbook and is open to students with a little background in economics and econometrics. On the international trade side, a good complementary textbook, useful to complement the first lectures, is Krugman, P. and M. Obstfeld (2009), International Economics: Theory and Policy. Also, as the course is strongly applied-oriented and based on the reading and presentation of empirical papers, some understanding of statistical methods is useful. A good introductory textbook is J. Wooldridge, Introductory Econometrics: A modern Approach
Grading
The grading will be based on (a) student presentations (35%, by group of 2 students) (b) a final exam (65%, individual).
- Presentation: you’ll have to choose a recent paper from the reading list among those suggested below. Presentations will be at the end of each lecture, will last around 20 minutes and will be followed by a general discussion. Other papers, included in the reading list or not, can be presented upon my approval.
Advice for presentations: try to vehicle the main idea of the paper, i.e. the question asked, methodological problems faced and solution proposed in an intuitive way. Avoid equations as much as possible.
- Exam: A closed book exam will be organized in the last lecture.
Downloading Papers
From a computer based the Institute's campus, the readings on JSTOR or Science Direct are freely downloadable as the Institute has subscriptions to these services.
General outline
Part I - trade theories: weeks 2-5
Part II - Specific Topics: Weeks 6-13
Lectures slides and readings (the slides will be progressively uploaded)
How to read an econometric table?
Week 1. Economic Perspectives on globalization
Readings
- Dollar, D. (2005), Globalization, Poverty, and Inequality since 1980, International Bank for Reconstruction and Development/The World bank.
- Stern, R. and A. Deardorff (2006), Globalization’s Bystanders: Does Trade Liberalization Hurt Countries That Do Not Participate?, World Development, 34(8), pp. 1419–1429.
Weeks 2 and 3. Comparative advantage theories
Why do countries trade? What are the gains and losses from trade openness? (Ricardo, Hecksher-Ohlin models; recent extensions: institutions and trade, finance and trade)
Readings
- Krugman & Obsfeld textbook chapters 3 and chapter 4
Papers for presentation
- A. Costinot and D. Donaldson (2012), “Ricardo’s theory of comparative advantage: old idea, new evidence”, AER Papers and Proceedings
- D. Bernhofen and J. Brown (2004), “A direct test of the theory of comparative advantage: the case of Japan”, JPE
- Nunn, Nathan (2007). "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Quarterly Journal of Economics, 122(2), p.569-600.
Weeks 4 and 5. Firms in International trade
How does trade affect competition? What are the consequences of trade at the firm-level?
Readings
- Krugman, P. and M. Obstfeld (2009), International Economics: Theory and Policy. Chapter 6
- Bernard et al. literature review on the empirics of firm heterogeneity in trade
Papers for presentation
- Pavcnik N. (2002) “Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants”, RES
- Trefler, D. (2004) “The Long and The Short of the Canada-U.S. Free Trade Agreement”, AER
- Volpe Martincus and Carballo (2008), "Is export promotion effective in developing countries? Firm-level evidence on the extensive and intensive margins of exports", JDE
Week 6 : Trade and growth
What is the overall impact of trade openness and trade policy on growth? Through which channels trade openness impacts growth? Are policies complementary to liberalization needed?
Readings
- Rodriguez and Rodrick (2000)
Papers for presentation:
- Feyrer (2011), "Distance, Trade and Income - the 1967 to 1975 closing of the Suez canal as a natural experiment"
- Rodrick, Subramanian and Trebbi (2004) Institutions rule: The primacy of institutions over geography and integration in economic development”, JEG
Week 7. New Economic Geography
How does the spatial dimension of the economy matter? Why economic activities locate so unevenly? What are the forces behind dispersion and agglomeration?
Papers for presentation :
- Redding and Sturm (2010) “The Costs of Remoteness: Evidence from German Division and Reunification”, AER
- Davis and Weinstein (2002). “Bones, Bombs and Break Points: The Geography of Economic Activity”, AER
Week 8: Trade and income inequality
Can openness to trade explain the increase in wage inequality in developing countries?
Readings
- Developing countries and the current debate: Krugman’s Vox, Rodrik's blog
Week 9: Poor countries and the trading system: Market access, income, and poverty
What are the benefits of access to industrialized market for developing countries? Is special and differential treatment justified and efficient?
Papers for presentation (weeks 8-9)
- Autor, Dorn and Hanson (2012) The China Syndrome: Local Labor Market Effects of Import Competition in the United States, AER
- Attanasio, O., Goldberg, P. and Pavcnik, N., 2004, “Trade Reforms and Wage Inequality in Colombia”, JDE
- Autor, Dorn, Hanson, Song (2014) “Trade adjustment: worker-level evidence”, forth. QJE
- Topalova (2010), “Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India” , AEJ-Applied
- Mc Caig (2009) "Exporting out poverty: Provincial poverty in Vietnam and US market access"
Week 10: Trade and Conflict
How does international trade affect political instability? Does trade prevent or triggers wars?
Papers for presentations
- Martin, Mayer, Thoenig (2008), "Make Trade not War", Review of Economic Studies
- Jha (2012), "Trade, institutions andethnic tolerance: evidence from South Asia", mimeo
Week 11: Trade and agriculture
How does specialization in agricultural goods affect development? What are the main barriers to agricultural trade in developing countries?
Potential other topics
Trade and the environment
What is the environmental impact of international trade? How do environmental regulations affect firms’ location decisions?
Reading
- Copland and Taylor (2004) "Trade, growth, and the environment", Journal of Economic Literature
Technology transfer through trade and FDI
Slides
Does exporting foster productivity growth? Are there spillovers associated with FDI? How?
Readings
Additional Readings
Abbreviations (name of journals)
AER: American Economic Review; EER: European Economic Review; EMA: Econometrica; JIE: Journal of International Economics; JPE: Journal of Political Economy; JDE: Journal of Development Economics. JEL: Journal of Economic Literature; NBER National Bureau of Economic Research (nber.org); QJE Quarterly Journal of Economics, RIESTAT: Review of Economics and Statistics; RES: Review of Economic Studies
NEOCLASSICAL TRADE THEORY
- Davis, D. and D. Weinstein, 2002, "The Factor Content of Trade", in Handbook of International Trade, James Harrigan, ed., New York: Blackwell, 2002.
- Davis, D. and D. Weinstein, 2001, "An Account of Global Factor Trade," American Economic Review (December): 1423-1453.
- Bowen, Leamer and Sveikauskas, “Multicountry, Multifactor tests of the factor abundance theory”, AER 1987
- Harrigan, J., 2002. "Specialization and the Volume of Trade: Do the Data Obey the Laws?" forthcoming in K. Choi and J. Harrigan, editors, Handbook of International Trade, New York: Basil-Blackwell. (Also available as NBER Working Paper No. 8675.) (part of comparative advantage)
- Lai H. and Zhu S. (2007), “Technology, endowments, and the factor content of bilateral ”, JIE
- Leontief, W., “Domestic Production and Foreign Trade: The American Capital Position Re-examined”, Economica Internazionale, 1954
- Leontief, W.W., “Factor Propositions and the Structure of American Trade: Further Theoretical and Empirical Result´s”, RIESTAT, 1956
- Schott, Peter K. (2003), “One Size Fits All? Heckscher-Ohlin Specialization in Global Production,“ AER
- Trefler, D. "International factor price differences: Leontief was right!" JPE 1993
- Bernhofen and Brown (2004). “A Direct Test of the Theory of Comparative Advantage: The Case of Japan”, JPE
FIRMS IN INTERNATIONAL TRADE
- Bernard, A.B. and Jensen, J.B. (1999) "Exceptional Exporter Performance: Cause, Effect, or Both?" JIE
- Bernard, Jensen and Schott (2006). “Survival of the best fit:(...)”, JIE
- Bernard, Jensen, Redding and Schott (2007). Firms in international trade, Journal of Economic perspectives
- Chaney (2008) “Distorted Gravity: the Intensive and Extensive Margins of International Trade”, AER
- Crozet Head and Mayer(2009), “Quality sorting and trade: Firm-level evidence for French wine”, CEPR DP
- Helpman, Melitz, Yeaple (2004) "Export Versus FDI with Heterogeneous Firms", AER
- Pavcnik (2002) “Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants”, RES
- Robert and Tybout (1997) "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs”, AER
- Trefler, Daniel, (2004) “The Long and The Short of the Canada-U.S. Free Trade Agreement.” AER
- Eaton, Kortum, Kramarz (2004) Dissecting Trade: Firms, Industries, and Export Destinations” AER P&P
- Head and Ries, "Rationalization effects of tariffs reductions"
TRADE AND GROWTH
- Rodriguez, Francesco and D. Rodrik (1999), “Trade Policy and Economic Growth : A Skeptic’s guide to the Cross-national Evidence”, NBER WP 7081
- Wagner (2007) “Exports and Productivity: A Survey of the Evidence from Firm-level Data”, World Economy
- Ben-David (1993): “Equalizing Exchange: Trade Liberalization and Income Convergence,” QJE
- Chang, Kaltani, Loayza (2009) “Openness can be good for growth: the role of policy complementarities”, JDE
- De Loecker (2007) “Do exports generate higher productivity? Evidence from Slovenia”, JIE
- Edwards, Sebastian (1998), “Openness, Productivity and Growth: What Do We Really Know?”, EJ 108, 383-398.
- Dollar, David and A. Kray (2001), “Trade, Growth, and Poverty”, World Bank Policy Research Working Paper 2615
- Frankel and Romer (1999) “Does trade cause growth?”, AER
- Rodrick, Subramanian and Trebbi (2004) Institutions rule: The primacy of institutions over geography and integration in economic development”, JEG
- Harrison (1996): “Openness and Growth: A Time-Series, Cross-Section Analysis for Developing Countries,” JDE
- Lileeva and Trefler (2010), “Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants”, QJE
- Van Biesebroeck (2003) “Exporting Raises Productivity in Sub-Saharan African Manufacturing Plants”, NBER Working Paper No. 10020
- Wacziarg, R. (2001): “Measuring the Dynamic Gains from Trade,” WorldBank Economic Review
- Warcziag, Romain and K. H. Welch (2003), “Trade Liberalization and Growth: New Evidence”, NBER WP 10152
- Goldberg et al (2010), "Imported intermediate inputs and domestic product growth: Evidence from India", QJE
TRADE AND THE LABOR MARKET
- Autor, Dorn and Hanson (2012) The China Syndrome: Local Labor Market Effects of Import Competition in the United States
- Attanasio, O., Goldberg, P. and Pavcnik, N., 2004, “Trade Reforms and Wage Inequality in Colombia”, JDE
- Berman, E., J. Bound and Z. Griliches (1994), "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing", NBER Working Paper 4255
- Borjas, G., R. Freeman and L. Katz (1997), "How Much do Immigration and Trade Affect Labor Market Outcomes?", BPEA 1, 1-90
- Biscourp and Kramarz (2007), “Employment, skill structure and international trade”, JIE
- Krugman (2007), “Trade and Inequality Revisited”, Vox-EU
- Lawrence and Slaughter (1993), “Trade and US Wages: Great Sucking Sound or Small Hiccup?”, Brooking Papers on Economic Activity
- Wood, Adrian (1997), "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom", WorldBank Economic Review 11.
- Bustos, Paula (2006). "Rising Wage Inequality in the Argentinean Manufacturing Sector: The Impact of Trade and Foreign Investment on Technology and Skill Upgrading," CREI mimeo.
- Dutt and Traca "Trade and the Skill bias: It's not how much but whit whom you trade", CEPR Discussion paper 5263
- Zhu and Trefler (2005) "Trade and inequality in developing countries: a general equilibrium analysis" JIE
- See also Baldwin vox column on outsourcing
- Feenstra, Robert C. and G. H. Hanson (1996), "Globalization, Outsourcing, and Wage Inequality", AER 86, 240-245.
- Feenstra, Robert C. and G. H. Hanson (1999), "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates for the U.S., 1979-1990", QJE 114, 907-940.
- Grossman, G. M. and E. Rossi-Hansberg (2008), “Trading tasks: A simple theory of offshoring", AER.
- Baldwin and Robert Nicoud (2010) "Trade-in-goods and trade-in-tasks: an Integrating framework"
- Aghion, P. and P. Howitt (1992), "A model of growththrough creative destruction", Econometrica
- Acemoglu, Daron (2003), "Patterns of Skill Premia", RES 70, 199-230.
- Thoenig, Mathias and T. Verdier (2003), "A Theory of Defensive Skill-Biased Innovation and Globalization", AER
- Verhoogen, E. (2008), “Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector”, QJE
NEW ECONOMIC GEOGRAPHY
- Davis and Weinstein (2002). “Bones, Bombs and Break Points: The Geography of Economic Activity”, AER
- Duranton, G. and H.G. Overman (2005), “Testing for Localisation Using Micro-Geographic Data”, RES 72, 1077-1106
- Hanson (2005), “Market Potential, Increasing Return and Geographic Concentration”, JIE
- Head, K., and T. Mayer (2004), “Market Potential and the Location of Japanese Firms in the European Union'', RIESTAT
- Redding and Venables (2004). “Economic Geography and International Inequality”, JIE
- Redding and Sturm (2010) “The Costs of Remoteness: Evidence from German Division and Reunification”, AER
TRADE AND PRODUCTIVITY
- Lileeva and Trefler (2010), “Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants”, QJE
- Bernard, A.B. and Jensen, J.B. (1999) "Exceptional Exporter Performance: Cause, Effect, or Both?" JIE
- De Loecker (2007) “Do exports generate higher productivity? Evidence from Slovenia”, JIE
- Van Biesebroeck (2003) “Exporting Raises Productivity in Sub-Saharan African Manufacturing Plants”, NBER Working Paper No. 10020
MARKET ACCESS, INCOME, POVERTY
- Brambilla, I., G. Porto and A. Tarozzi (2012) Adjusting to Trade Policy: Evidence from U.S. Antidumping Duties on Vietnamese Catfish, The Review of Economics and Statistics
- Balat, Brambilla et al. (2009) "Realizing the Gain from trade: Export crops, marketing costs, and poverty", Journal of International Economics
- Mc Caig (2009) "Exporting out poverty: Provincial poverty in Vietnam and US market access"
- Porto (2010) "International market access and poverty in Argentina", Review of International Economics
- Ozden and Reinhardt (2005), "The Perversity of Preferences: GSP and Developing countries trade policies, 1976-2000", Journal of Development Economics
- Amiti and Romalis (2007) "Will the Doha Round lead to preference erosion?", NBER Working Paper - Frazer and Van Biesebroeck (2009) "Trade Growth under the African Growth Opportunity act", Review of Economics and Statistics
- Brambilla, Port and Tarozzi (2008) "Adjusting to trade policy: evidence from US antidumping duties on Vietnamese Catfish", NBER Working Paper
TRADE AND THE ENVIRONMENT
- Copland and Taylor (2004) "Trade, growth, and the environment", Journal of Economic Literature
- Antweiler et al. (2001), "Is free trade good for the environment?", American Economic Review
TRADE AND CONFLICTS
- Martin, Mayer, Thoenig (2008), "Make Trade not War", Review of Economic Studies
- Martin, Mayer, Thoenig, (2012), "The geography of conflicts and regional trade agreements", AEJ-Macro
- Jha (2012), "Trade, institutions and ethnic tolerance: evidence from South Asia", mimeo
- Vicard (2012), "Trade, conflicts, and political integration: explaining the heterogeneity of regional trade agreements", European Economic Review
MIGRATION, BRAIN DRAIN
- Beine, Docquier & Rappoport (2008) "Brain drain and Human capital formation in developing countries: Winners and Loosers", Economic Journal
- Faini (2010) "Remittances and the Brain Drain: Do more skilled migrants remit more?", WorldBank Economic Review
- Beine, Docquier & Rappoport (2010) "Diasporas", Journal of Development Economics
- Docquier and Rappoport (2007)