This is a mixture of teacher-led lectures and student-led presentation course on international economics, covering a range of advanced international trade topics. The objective of the course is to familiarize the students with the cutting-edge research in international trade. While theory and applications will both be covered, emphasis will be placed on tools and analytical techniques rather than case studies. The overall goal is to develop a broad conceptual understanding of ongoing research in international trade and familiarity with the analytical techniques used by economists in studying those questions and in developing policy recommendations. International Trade Theory is the pre-requisite for this class. Knowledge of calculus, statistics and econometrics will be helpful.

Professor Hiau Looi Kee
Email: hiaulooikee@gmail.com
Office: B244 Penn 555

TA: Richard Zhang <richardzhz0505@gmail.com>

Not applicable.

There is no required textbook for this course, as we are surveying the frontier of research in international trade. So no need to rush out to buy any books. However, students may find it useful to refer to the following books which may have used for the previous courses:

1. International Economics: Theory and Policy by Paul Krugman, Maurice Obstfeld, Marc Melitz (12th Edition). Advanced undergraduate textbook to refresh your memories.
2. International Trade by Robert Feenstra and Alan Taylor (5th Edition). More real world applications of trade models, fun to read.
3. Advanced International Trade by Robert Feenstra (2 nd Edition) for the textbook treatment of the topics we cover in class. It provides a theoretical structure for our discussions, and is on library reserve.
4. Wooldridge’s Introductory Econometrics and Econometric Analysis of Cross Section and Panel Data are useful technical references.

All of the other readings, mostly journal articles, will be uploaded on Canvas. I will also make announcements, post all course material, and conduct class communication there. Please make sure you check Canvas periodically.

Two in-class presentation and leading discussion of a paper from our reading lists (25% each)
Three referee reports (10% each)
Class participation (20%)

A = 95% and above
A- = 90.0% - 94.9%
B+  = 88% - 89.9%
B   = 83% - 87.9% 
B-   = 80% - 82.9%
C   = 70% - 79.9%
D = below 70%

1. Review two sector models, H-O model; review Feenstra and Hanson approach to H-O; firms in international trade; exporting and firm performance (Jan 26 and Feb 2)

• Various chapters from KOM for reviewing Ricardo, Specific Factors Model, H-O
• Feenstra and Taylor, Ch 7, for reviewing how to look at H-O through the firm’s perspective
• A. Bernard, J. Jensen, S. Redding, and P. Schott. “Firms in International Trade.” The Journal of Economic Perspectives, Vol. 21, No. 3 (Summer, 2007), pp. 105-130
• Optional reading: D. Atkin, A. Khandelwal, and A. Osman. “Exporting and Firm Performance: Evidence from a Randomized Experiment.” Quarterly Journal of Economics, Vol. 132, Issue 2, pp. 551-615

2. Intra-industry trade and increasing returns to scale: the Krugman model (Feb 9-16)

• Feenstra, Ch 4: “Trade in Intermediate Inputs and Wages,” in Advanced International Trade, 2nd edition
• Feenstra, “New Evidence on the Gains from Trade,” Review of World Economics, Dec 2006, section 3
• Feenstra, Ch 5: “Monopolistic Competition and the Gravity Equation I,” in Advanced International Trade, 2nd edition
• Elhanan Helpman, “Understanding Global Trade”, 2011, Harvard University Press, Chapter 4

3. How firms select into international trade: the Melitz model (Feb 23-Mar 2)

• Feenstra, Ch 6: “Monopolistic Competition and the Gravity Equation II” in Advanced International Trade, 2nd edition
• Feenstra, “New Evidence on the Gains from Trade,” Review of World Economics, Dec 2006, section 4
• Elhanan Helpman, “Across Firms within Industries,” in Understanding Global Trade, 2011, Chapter 5 (focus on 5.1-5.2)
• Elhanan Helpman, “Offshoring and Outsourcing” in Understanding Global Trade, 2011, Ch 6
• M. Melitz and D. Trefler. “Gains from Trade when Firms Matter.” The Journal of Economic Perspectives, Vol. 26, No. 2 (Spring 2012), pp. 91-118

4. Labor market adjustment to large changes in trade (March 9-16)

• David Autor, David Dorn, and Gordon Hanson. “The China Syndrome,” American Economic Review, 2013
• David Autor, David Dorn, Gordon Hanson, and Jae Song. “Trade Adjustment: Worker-Level Evidence,” Quarterly Journal of Economics, 2014
• David Autor, David Dorn, and Gordon Hanson. “The China Shock,” Annu. Rev. Econ. 2016
• Robert Feenstra, Hong Ma, and Yuan Xu. “US Exports and Employment,” Journal of International Economics, 2019

5. The effects of geographically localized labor markets (March 30)

• Helpman, “Regional Disparity,” chapter 7 in Globalization and Inequality, 2018

6. Product differentiation and firm heterogeneity: how the use of technology affects wages (April 6)

• Helpman, “Firm Characteristics,” chapter 8 in Globalization and Inequality, 2018

7. Technology choice and technical change directed by market forces: effects on the relationship between trade and wages (April 13)

• Helpman, “Technology Choice,” chapter 9 in Globalization and Inequality, 2018

8. Gains from trade and trade agreements (April 20-27)

• Robert Feenstra, “Gains from Trade and Regional Agreements,” in Advanced International Trade, 2016
• David Gantz, “An Introduction to the United States-Mexico-Canada Agreement: Understanding the New NAFTA,” World Trade Review, 2022
• Chad Bown and Barbara Weisel, “Biden’s new Indo-Pacific talks vs TPP,” Trade Talks Podcast, episode 166, Sept. 21, 2022

9. Case study: Electric vehicles and international trade (May 4)

• Kenneth Gillingham, “What will it take to transition to electric cars?” Yale Insights, March 16, 2022
• Chad Bown and Kristin Dziczek, “Will new US tax credits remake electric vehicle supply chains?” Trade Talks Podcast, episode 167, Oct. 3, 2022

Course Reading list (Papers in bold will be presented by the professor in class)

1. Why Countries Trade? (Weeks 1-2: 1/26, 2/2)
- Melitz, Marc J. (2003). “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.” Econometrica 71(6): 1695-1725.
- Melitz, Marc and Gianmarco Ottaviano (2008) “Market Size, Trade, and Productivity.” Review of Economic Studies.
- Chaney, Thomas (2008). “Distorted Gravity: The Intensive and Extensive Margins of International Trade.” American Economic Review 98(4): 1707-21.
- Helpman, Elhanan, Marc Melitz and Yona Rubinstein (2008). “Estimating Trade Flows: Trading Partners and Trade Volumes.” Quarterly Journal and Economics 123(2): 441-87.
- Bernard, Andrew, Stephen Redding and Peter Schott (2007). “Comparative Advantage and Heterogeneous Firms.” Review of Economic Studies 74(1): 31-66.
- Bernard, Andrew, Jonathan Eaton, Bradford Jensen, and Sam Kortum (2003) “Plants and Productivity in International Trade.” American Economic Review.
- Cherkashin, Ivan, Svetlana Demidova, Hiau Looi Kee and Kala Krishna (2015). “Firm Heterogeneity and Costly Trade: A New Estimation Strategy and Policy Experiments,” Journal of International Economics 96(1): 18-36.
- Eaton, Jonathan, Samuel Kortum, and Francis Kramarz (2011). “An Anatomy of International Trade: Evidence From French Firms.” Econometrica 79(5): 1453–1498.
- Arkolakis, Costas (2010). “Market Penetration Costs and the New Consumers Margin in International Trade.” Journal of Political Economy 118(6): 1151-1199.
- Eaton, Jonathan and Samuel Kortum (2002), “Technology, Geography, and Trade.” Econometrica 70(5): 1741-79.
- Fieler, Cecilia (2011). “Non-Homotheticity and Bilateral Trade: Evidence and a Quantitative Explanation.” Econometrica, 79(4): 1069-1101.
- Costinot, Arnaud, Dave Donaldson, Ivana Komunjer (2011). “What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas.” The Review of Economic Studies 79(2): 581–608.
- Donaldson, Dave (2018). “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure.” American Economic Review 108(4-5): 899-934.
- Alvareza, Fernando and Robert E. Lucas (2007). “General equilibrium analysis of the Eaton–Kortum model of international trade.” Journal of Monetary Economics 54(6): 1726-1768.
- Costinot, Arnaud (2009). “On the origins of comparative advantage.” Journal of International Economics 77(2): 255-264.
- Chor, Davin (2010). “Unpacking sources of comparative advantage: A quantitative approach.” Journal of International Economics 82(2): 152-167.
- Costinot, Arnaud (2009). “An Elementary Theory of Comparative Advantage.” Econometrica 77 (4): 1165–1192.

2. Welfare Gains from Trade, Trade Elasticities and Trade Impacts (Weeks 3-4: 2/9, 2/16)
- Arkolaskis, Costas, Arnaud Costinot and Andres Rodriguez-Clare (2012), “New Trade Models, Same Old Gains?” American Economic Review 102(1): 94-130.
- Melitz, Marc J., and Stephen J. Redding (2015). “New Trade Models, New Welfare Implications.” American Economic Review, 105(3): 1105-46.
- Constinot, Arnaud, and Andres Rodriguez-Clare (2014). “Trade Theory with Numbers: Quantifying the Consequences of Globalization.” Handbook of International Economics 4(4), 197-261.
- Caliendo, Lorenzo and Fernando Parro (2015). “Estimates of the Trade and Welfare Effects of North American Free Trade Agreement.” The Review of Economic Studies 82 (1): 1-44.
- Simonovska, Ina and Michael Waugh (2014). “The Elasticity of Trade: Estimates and Evidence.” Journal of International Economics 92(1), 34-50.
- Arkolakis, Costas, Svetlana Demidova, Peter J. Klenow, and Andres Rodriguez-Clare (2008). “Endogenous Variety and the Gains from Trade," American Economic Review 98(2): 444-50
- Melitz, Marc and Daniel Trefler (2012) “Gains from Trade when Firms Matter.” Journal of Economic Perspective.
- Kee, Hiau Looi, Alessandro Nicita, and Marcelo Olarreaga (2008). “Import Demand Elasticities and Trade Distortions”. Review of Economics and Statistics 90(4): 666-682.
- Kee, Hiau Looi, and Alessandro Nicita (2023). “Quantifying Economic Impacts of Trade Agreements with Heterogeneous Trade Elasticities,” Review of International Economics 12723: 1- 30. https://onlinelibrary.wiley.com/doi/full/10.1111/roie.12723  
- Ramondo, Natalia and Andrés Rodríguez-Clare (2013). “Trade, Multinational Production, and the Gains from Openness,” Journal of Political Economy 121(2): 273-322.
- Ossa, Ralph (2015). “Why trade matters after all.” Journal of International Economics, 97(2): 266-277.

3. Trade Liberalization and Consequences (Weeks 5-6: 2/23, 3/1)
- Autor, David, David Dorn, and Gordon Hanson (2014) “The China Syndrome: Local Labor Market Effects of Import Competition in the United States.” American Economic Review.
- Pierce, Justin and Peter K. Schott (2016). “The Surprisingly Swift Decline of U.S. Manufacturing Employment.” American Economic Review 106(7):1632-62.
- Helpman, Elhanan, Oleg Itskhoki, and Stephen Redding (2010). “Inequality and Unemployment in a Global Economy.” Econometrica 78(4): 1239-83.
- Goldberg, Penny, Amit Khandelwal, Nina Pavcnik, and Petia Topalova (2010) “Imported Intermediate Inputs and Domestic Product Growth: Evidence from India.” Quarterly Journal of Economics.
- Khandelwal, Amit and Petia Topalova (2011) “Trade Liberalization and Firm Productivity: The Case of India.” Review of Economics and Statistics.
- Krishna, Pravin, and Senses, Mine (2014) “International Trade and Labor Income Risk in the US.” Review of Economic Studies.
- Bustos, Paula (2011) “Trade Liberalization, Exports and Technology Upgrading: Evidence on the impact of MERCOSUR on Argentinian Firms.” American Economic Review.
- Bloom, Nicholas, Mirko Draca, and John Van Reenen (2013) “Trade Induced Technical Change: The Impact of Chinese Imports on Innovation, Diffusion and Productivity.” Review of Economic Studies.
- Dix-Carneiro, Rafael and Brian K. Kovak (2017). “Trade Liberalization and Regional Dynamics.” American Economic Review 107(10): 2908-46.
- Kovak, Brian K. (2013). “Regional effects of trade reform: What is the correct measure of liberalization?” American Economic Review 103(5): 1960-1976
- Lileeva, Alla and Daniel Trefler (2010) “Improved Access to Foreign Markets Raises Plant Level Productivity . . . for Some Plants.” Quarterly Journal of Economics.
- Amiti, Mary and Jozef Konings (2007). “Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia.” The American Economic Review 97(5): 1611-1638.

4. Firms, Productivity and Foreign Direct Investment (Week 7-8: 3/8, 3/15)
- De Loecker, Jan (2011). “Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity.” Econometrica 79(5): 1407–1451 
- De Loecker, Jan, Pinelopi K. Goldberg, Amit K. Khandelwal, Nina Pavcnik (2016). “Prices, Markups, and Trade Reform.” Econometrica 84(2): 445–510.
- Demidova, Svetlana, Hiau Looi Kee and Kala Krishna (2012). “Do Trade Policy Differences Induce Sorting? Theory and Evidence from Bangladeshi Apparel Exporters” the Journal of International Economics 87(2): 247 – 261.
- Bernard, Andrew, Jonathan Eaton, Bradford Jensen, and Sam Kortum (2003) “Plants and Productivity in International Trade.” American Economic Review.
- Khandelwal, Amit and Petia Topalova (2011) “Trade Liberalization and Firm Productivity: The Case of India.” Review of Economics and Statistics.
- Tang, Heiwai and Yifan Zhang (2016) “Do Multinational Firms Transfer Culture? Evidence on Female Employment in China” Johns Hopkins University, mimeo.
- Ma, Yue, Heiwai Tang, Yifan Zhang (2014) “Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters.” Journal of International Economics.
- Smarzynska Javorcik B. (2004) “Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages.” American Economic Review.
- Hiau Looi Kee (2015). “Local Intermediate Inputs, and the Shared Supplier Spillovers of Foreign Direct Investment," the Journal of Development Economics 112: 56-71.

5. Global Value Chains (Weeks 9-10: 4/5, 4/12) (Note: no class on 3/22 and 3/29)
- Grossman, Gene M. and Esteban Rossi-Hansberg (2008). “Trading Tasks: A Simple Theory of Offshoring.” The American Economic Review 98(5): 1978-1997
- Koopman, Robert, Zhi Wang, and Shang-Jin Wei (2014) “Tracing Value-Added and Double Counting in Gross Exports.” American Economic Review.
- Kee, Hiau Looi and Heiwai Tang (2016) “Domestic Value Added in Exports: Theory and Firm Evidence from China.” American Economic Review Vol. 106, No. 6: 1402-1436.
- Johnson, Robert and Guillermo Noguera (2012) “Accounting for Intermediates: Production Sharing and Trade in Value Added.” Journal of International Economics.
- Antràs, Pol, Davin Chor (2013). “Organizing the Global Value Chain.” Econometrica 81(6): 2127–2204.
- Antràs, Pol, Davin Chor, Thibault Fally, and Russell Hillberry (2012) “Measuring the Upstreamness of Production and Trade Flows.” American Economic Review Papers and Proceedings.
- Hummels, David, Rasmus Jørgensen, Jakob Munch and Chong Xiang (2014). “The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data.” The American Economic Review 104 (6): 1597-1629.
- Baldwin, Richard and Frédéric Robert-Nicoud (2014). “Trade-in-goods and trade-in-tasks: An integrating framework.” Journal of International Economics 92(1): 51-62.
- Fernandes, Ana Margarida, Hiau Looi Kee and Deborah Winkler (2022). “Determinants of Global Value Chain Participation: Cross-Country Evidence.” The World Bank Economic Review 36(2): 329--360.

6. Trade Policies, Trade Wars and Climate Change (Weeks 11-13: 4/19, 4/26, 5/3) (Note: 5/3 is a make-up class for 3/29)
- Grossman, Gene and Elhanan Helpman (1994) “Protection for Sale.” American Economic Review.
- Goldberg, Pinelopi Koujianou and Giovanni Maggi (1999). “Protection for Sale: An Empirical Investigation.” American Economic Review 89(5): 1135-1155.
- Gawande, Kishore, Pravin Krishna, and Michael Robbins (2006) “Foreign Lobbying and U.S. Trade Policy.” Review of Economics and Statistics.
- Kee, Hiau Looi, Marcelo Olarreaga and Peri Silva (2007). “Market access for sale.” Journal of Development Economics 82(1): 79-94.
- Kee, Hiau Looi, Alessandro Nicita, and Marcelo Olarreaga (2009). “Estimating Trade Restrictiveness Indices.” Economic Journal 119(534): 172–199.
- Kee, Hiau Looi, and Alessandro Nicita (2022). ““Trade Fraud and Non-Tariff Measures,” Journal of International Economics 139: 103682.
- Bagwell, Karl and Bob Staiger (2011). “What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization.” American Economic Review 101(4): 1238-73.