Teaching

Week 2 (3/8) :

• the Armington setup 

  • environment: timing, commodity space, preference, technology, market structure (assume competitive market)

  • optimization: 

    • consumer: demand curve

    • firm(s): supply curve

combining the two, we get our first micro-founded gravity equation!  

Exercises: 

• 1. derive the above objects 

  2. close the model by imposing the market clearance conditions (how many markets are there?)

Week 3 (3/15) :

• Krugman (1980)

Exercise: 

• • How does the gravity equation in Krugman's environment differ from the Armington setup?

  • What implications can we draw from Krugman's model but not from the Armington setup?

Week 4 (3/22) : 

• We worked through a simplified, static version of the model in Hopenhayn (1992), which is one of the two main building blocks of the Melitz model (the other building block is Krugman (1980)). 

• The key elements are 

• firm heterogeneity, 

• the sunk cost of entry, and 

• the fixed cost of production. 

These elements combined generate selection across firms, which is absent in Krugman's homogeneous firm environment.

•  In class, we discussed how an increase in the entry cost, ke, affects a*. 

Exercise: 

• • How does p* change when k decreases? Assume the productivity of the potential entrants follow a Pareto distribution (and assume the shape parameter adopts value for integrability) What is the intuition?

Week 5 (3/29) :

• Review and Q&A

Week 6 (4/5) :

• Ch'ing Ming, no class

Week 7 (4/12) :

• Hopenhayn (1992) 

Week 8 (4/19) :

• Chaney (2008)

• Exercise: 

  • Type the derivation of Proposition I & II in the paper in Lyx

Week 9 (4/26) :

• Structural models, structural estimation

  • We talked about how structural models enrich the questions one can answer

    • ... no longer restricted by the interpretation of regression coefficients that all the other factors are held constant

  • When it comes to parameterization, we explained the difference between reduced-form estimation and structural estimation

• Eaton-Kortum (2002)

  • We stopped at equation (8) in the paper

• Exercise: 

  • Derive equation (8) in the paper

Week 10 (5/3)

• International Worker's Day, no class 

Week 11 (5/10)

Midterm presentation pick one paper to present

• Estimation related to Melitz  (2003) and Chaney (2008)

  • Eaton, J., Kortum, S., & Kramarz, F. (2011). An anatomy of international trade: Evidence from French firms. Econometrica, 79(5), 1453-1498.

  • Crozet, M., & Koenig, P. (2010). Structural gravity equations with intensive and extensive margins. Canadian Journal of Economics/Revue canadienne d'économique, 43(1), 41-62.

  • Chaney, T. (2014). The network structure of international trade. American Economic Review, 104(11), 3600-3634.

  • Eaton, J., Kortum, S., & Kramarz, F. (2004). Dissecting trade: Firms, industries, and export destinations. American Economic Review, 94(2), 150-154.

• Multinationals

  • Elhanan Helpman, Marc J. Melitz and Stephen R. Yeaple,  Export versus FDI with Heterogeneous Firms, The American Economic Review Vol. 94, No. 1 (Mar., 2004), pp. 300-316

  • Sheng Cai and Wei Xiang, Multinational Production, Technology Diffusion, and Economic Growth , working paper

Week 11 (5/17)

• Eaton Kortum (2002)

Week 12 (5/24)

• Eaton Kortum (2002)

Week 13 (5/31)

• Romando - Rodriguez-Clare (JPE, 2010)

Week 14 (6/7)

• Alviarez-Cravino-Ramondo (JPE, 2021) 

Week 14 (6/14)

• Dyrda-Hong-Steinberg (Working paper, 2023)

Week 15 (6/21)

• Presentations