The lectures below use basic tools of microeconomics (especially supply/demand and monopoly models) to analyze the impact of economic globalization on consumers, producers, and national welfare. More advanced topics using intermediate tools can be found here.
These lectures are best viewed in the order listed.
Opening to imports (13:08) (perfect competition, homogeneous goods): An analysis of a country opening up an industry to import competition. Pay particular attention to the impact on domestic prices, consumer surplus and producer surplus.
Equation version of opening to imports. Uses specific equations for relationships.
Opening to exports (14:05) (perfect competition, homogeneous goods): The analog looking at an industry operating in an export market. Note how the domestic price will tend to rise, hurting consumers while producers benefit.
Domestic monopoly and international competition (11:26) This video takes a look at the domestic welfare effects when a domestic monopoly now has to compete with foreigners who now have access to the domestic market.
Import demand and export supply (7:52) This video looks at the determination of world prices and introduces the concept of "import demand" and "export supply." These are derived from looking at the domestic conditions within the exporting and importing countries.
Small versus large country. "Small" countries in international markets must accept international prices as given. "Large" countries can affect world prices by their own actions.
Price volatility of primary commodities (14:02) Countries exporting or importing primary commodities (e.g. oil, copper, food) may face rapidly moving prices as a result of changes in the world economy. This is an application of the video on import demand and export supply.
A standard tool for governments to help a domestic industry is to impose taxes on imports coming to the country, i.e. impose a tariff. Videos 1-5 assume tariffs are placed on all imports. Video 6 examines the implication of putting a tariff only on one country, e.g. China or to sanction a particular country.
Impact of tariffs on domestic prices: (9:41). Tariffs will raise prices because of limited competition.
Basic tariff analysis: (11:34) Overall effects of tariffs on a small country are examined here.
Details about producer effects of tariffs: (5:41) Impact on producer surplus and production
Production deadweight losses of tariffs: (3:47) In what sense do tariffs impose costs by increasing domestic production
Details about consumer effects of tariffs (7:30) How are domestic consumers affected by increases in prices as a result of tariffs.
Differential Tariffs (i.e. economic effects when only some countries face higher tariffs)
Governments may use different methods to help a domestic import-competing industry. Two examples are limiting the amount of allowed imports. Another is providing direct support to the domestic industry through a subsidy.
Basic quota analysis (10:26) Restricting quantities of imports will raise domestic prices.
Foreign firms and quota rents (including discussion of 'voluntary export restraints' (VERs)): (3:07)
Tariffs vs. quotas (5:42) Tariffs and quotas can have similar effects on a domestic economy.
Import quotas (linear equation version) A specific example using linear supply and demand curves is examined.
Production subsidy for import competing industry (13:03) A government can increase production by subsidizing domestic producers rather than restricting imports.
Comparing tariffs, quotas, and production subsidies (assume that all policies result in a common target domestic production level)
Price Minimum for Imports Antidumping duties sometimes replaced with an agreement for foreigners to sell at a minimum price. Useful to compare with the impact of a VER.
Large countries can affect the international price of the good that they import. Falling demand, for example, in the US for crude oil can lower the international price of the good. (Review the video on small vs. large country if needed). These videos explore the consequence of a large country imposing a tariff or quota on its imported good.
Large country tariff (14:52) A large country may benefit from a tariff by forcing down the international price of the good.
Large country import quota A quota will result in significant quota rents for a large country.
Exporting goods can result in higher domestic prices. Governments sometimes restrict imports to help domestic consumers but at the expense of firms who may not be able to take advantage of foreign opportunities
A small country cannot affect the world price; domestic exporters must sell all products at the world price and those firms bear the burden of the restrictions.
Small country export tax: (11:13). A government may imposes a tax on all products that leave the country.
Small country export quota An alternative is to limit how much of the product is allowed to leave. This creates a "quota rent" for firms that can gain access.
Export taxes and export quotas reduce the amount of goods that a large country sends to the international market. This will tend to raise the international price, even as the domestic price falls.
Large country export tax (9:48) A large country can benefit from forcing foreign consumers to pay more.
Large country export quota (18:28) This is essentially the impact of a voluntary export restraint.
Governments often try to promote exports because of the effects on export jobs, profits, and "hard currency" earnings. But export promotion can hurt domestic consumers and result in excessive production.
Small country export subsidy (10:24) A small country export subsidy (paying firms to export) yields more economic losses than gains.
Small country production subsidy in an export industry (8:17) Subsidizing production rather than exports is less harmful.
Large country export subsidy (10:27) A large country subsidizing exports harms foreign producers and consequently is very controversial. The WTO allows for countervailing duties as retaliation, which are special tariffs placed on exports that have been subsidized and caused injury to foreign competitors.
Welfare-enhancing intervention by the government requires choices among policies. This video outlines some of the general principles about how to choose as well as the critical role of information when choosing a particular option. Please review this video before starting the videos below.
The videos below analyze the effects of intervening in the presence of a foreign monopoly. The setup presumes that the domestic economy can only obtain the product from a foreign source---in this example there is no possibility of producing the good domestically. The focus is on whether trade intervention can be welfare-improving and whether there are any superior alternatives. Note the importance of information for effective government intervention.
Linear demand (tariffs as welfare-improving) 9:41 This example presumes that domestic demand can be represented by a linear demand curve. A critical consequence: the marginal revenue curve will be steeper than the demand curve.
Constant elasticity of demand (import subsidies as welfare improving) 7:24 This example presumes that domestic demand is characterized by constant price elasticity of demand. A critical consequence: the marginal revenue curve will be flatter than the demand curve.
Welfare ranking of policies with foreign monopolies 9:51 Policy tools are ranked in terms of the domestic consequences. We will add to the mix the possibility of subsidizing imports.
Welfare-enhancing intervention by the government requires choices among policies. This video outlines some of the general principles about how to choose as well as the critical role of information when choosing a particular option. If you did not view this video before starting with item VII, please do so now.
Below please find three examples of externalities (i.e. when market prices do not reflect the underlying social cost or social benefit):
Negative consumption externalities in import market (11:57) This video examines outcomes when a good (that happens to be imported) has negative social consequences when it is consumed. A classical example would be cigarettes. The social costs occur whether the good is imported or produced domestically.
Positive production externalities in import market (17:47) This example involves a product for which there are positive spillovers when the good is produced domestically. For example, many have argued in the past that a robust domestic semiconductor industry has national security benefits.
Negative externalities in imports (12:43) An imported good might result in social costs not considered by private market actors. For example, petroleum purchased on the international market may result in higher defense costs as the Navy is used to protect sea lanes.