INTERNATIONAL ECONOMICS

Single discipline educational activity

Course Sheet

Academic Year of enrolment:

2019/2020

Academic Year of provision:

2019/2020

Type of Course:

Related/Supplementary

Degree:

Master's Degree Programme in MANAGEMENT

Disciplinary Sector:

Political Economy

Language:

English

Grouping type:

Credits:

Programme Year:

Professor and Collaborators:

PARISI Maria Laura Professor

Cycle:

First four months

Hours of classroom activity:

Hours of individual study:

165

Pre-requisites:

Students must have a good knowledge of Principles of Micro and Macroeconomics (undergraduate level), General Mathematics and English language. Proficiency in English is useful but not required.

Educational Goals

a) Knowledge and understanding (KN)
Students will be able to elaborate complex theoretical concepts regarding international economics, such as e.g. the absolute advantage and the comparative advantage (who trades what with whom and why), and the terms of trade. They will learn to solve models where resources distribution and use determine the pattern of trade, or where the market structure determines intra-industry trade. They will be able to identify gains from trade, which trade policies do countries apply and their effect on good prices and society welfare, and why developing countries have a different perspective about trade policy. They will deal with many case studies at hand.

b) Applying knowledge and understanding (AKN)
Students face empirical problems as well, especially regarding the evaluation of correlations and relationships between international trade aggregates on specific relevant topics, such as international competition (relative wages and productivity), the Leontieff paradox (skill-content of US imports and technologically-advanced trading partners), and so on. In order to achieve this objective, students learn to manage on-line databases, searching for adequate data, posing a research question, developing a method to get results and answering with complete and convincing conclusions.

c) Making judgements (MJ)
Students learn to formulate theoretically and empirically based arguments about past and current events of international trade such as why countries exchange goods, services or assets, what is the role of WTO in setting rules and solving disputes, and why countries need such an institution. Moreover, they can explain why policymakers today engage into applying tariffs and subsidies, especially in crucial sectors of the economy, and whether this is beneficial to trading countries. They learn to make judgements about the benefits or drawbacks of free trade, protectionism, and other levels of economic integration.

d) Communication skills (CS)
Students are required to present a team project in a poster session, in order to deliver one’s own abilities in communicating international trade concepts to a mixed (experts and not) audience (in English). Moreover, once per week, some students are picked at random to discuss in class their own solutions to homework.

e) Learning skills (LS)
This course gives a set of learning instruments that include homework problems to solve individually, the possibility to identify a research question and implement academic writing skills on a teamwork structured project with a deadline, and to make use of algebraic and graphic techniques to answer specific questions regarding international economics issues.

Content

Each lesson contains detailed content that students can find in the extended Program and in the slides provided by the teacher. Here you find a summary. Numbers relate to Chapters of the textbook.

1. Introduction to International Economics.
2. An overview of World Trade.
3. Labor Productivity and Comparative Advantage: the Ricardian Model.
4. Specific Factors and Income Distribution.
5. Resources and Trade: the Heckscher-Ohlin Model.
6. The Standard Trade Model.
7. External Economies of Scale and the International Location of Production.
8. Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises.
9. The Instruments of Trade Policy.
10. The Political Economy of Trade Policy.
11. Trade Policy in Developing Countries.
12. Controversies in Trade Policy.
(13. National Income Accounting and the Balance of Payments.)

Extended Syllabus

Extended Program:

1. Introduction to International Economics.
What is International Economics about?
The gains from trade.
The pattern of trade.
How much trade.
The Balance of Payment.
Exchange rate determination.
International Policy coordination.
The International Capital market.

2. An overview of World Trade.
Size matters! The Gravity Model.
Impediments to trade: distance, barriers, borders.
Has the world gotten smaller?
What do we trade?

3. Labor Productivity and Comparative Advantage: the Ricardian Model.
We build a model to explain how trade takes place.
Production functions and the resource constraint. Deriving the Production Possibility Frontier (PPF), the scale parameter and MRT in a country.
Assumptions on labor input requirement and productivity in two countries.
An absolute advantage explanation of the gains from trade.
One-factor Ricardian model: assumptions, derivation and solution.
Comparative advantage and pattern of trade.
Case study: War of the Roses.
Opportunity cost of producing and MRT.
Formal definition of Comparative Advantage (CA).
Specialization.

4. Specific Factors and Income Distribution.
The specific factors model.
What is a specific factor?
International trade in the specific factors model.
Income distribution and the gains from trade.

5. Resources and Trade: the Heckscher-Ohlin Model.
Two-factors Heckscher-Ohlin Model.
Factor endowment, Capital and Labor.
Price of factors: returns to labor and capital.
Preferences.
Technology.
Factor returns with free trade.
Two resource constraints and derivation of the PPF.
Numerical example.
Substitutability in factor inputs and the concavity of the PPF.
Isovalue line and optimal production.
Relative Prices and the pattern of trade.
The declining labor share.
Empirical evidence of the HO model.

6. The Standard Trade Model.
A standard model of a Trading Economy.
Production Possibilities and Relative Supply.
Relative Prices and Demand.
The Welfare effects of changes in the terms of trade.
Determining relative prices.

7. External Economies of Scale and the International Location of Production.
Economies of scale and international trade.
Economies of scale and the market structure.
The theory of external economies.
Interregional trade.

8. Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises.
The theory of imperfect competition.
Monopolistic competition and trade.
Intra-industry trade.
Trade costs and export decisions.
Dumping.
Horizontal and vertical FDI.
Trade-offs in FDI, outsourcing, offshoring.

9. The Instruments of Trade Policy.
Import tariffs, customs duties.
Case study: Steel Industry in the US in 2001.
Case study: EU trade policy.
Export tariffs.
Case study: Pakistan raw cotton tax in 1988.
Type of tariff: ad valorem or specific tariff.
When a small importing country imposes a tariff: graphical representation, equilibrium prices, welfare effects.
When Two countries trading one product: imposition of a tariff, graphical representation, international equilibrium price, who trades with whom.
Quotas and subsidies.

10. The Political Economy of Trade Policy.
The case for free trade.
National welfare argument against free trade.
Income distribution and trade policy.
International negotiations and trade policy.
the History of GATT.
Case study: Banana Republic: trade dispute over bananas.
Free Trade Areas: NAFTA.
The degree of economic integration, regional integration in the world and free trade areas.
Do agricultural subsidies hurt the third world?
Other Trade policies: Government procurement, export credit subsidies, regulation.
Summarising the effect of alternative trade policies.

11. Trade Policy in Developing Countries.
Import-substituting industrialization.
The infant industry argument.
Case study: Mexico.
Trade liberalization since 1985.
India's boom.

12. Controversies in Trade Policy.
Technology and externalities.
Imperfect competition and strategic trade policy.
Globalization and low-wage labor.
Globalization and the environment.

(13. National Income Accounting and the Balance of Payments.)

Recommended Bibliography

Paul Krugman, Maurice Obstfeld, Marc Melitz; International Economics: Theory and Policy (11th edition, global edition); Pearson; 2018; 978-1-292-21487-0;
Chapters 1 to 12, part of 13.

Digital tools (optional):
www.MyEconLab.com

Suggested readings:
Further readings will be distributed in class and on-line, via Moodle, regarding case studies and papers related to International Economics.

Methods of Provision

Conventional

Teaching Methods

It is advisable to attend each lecture, because the course requires students’ active learning.
ATTENDING STUDENTS WILL SIGN THEIR PRESENCE AT EACH LECTURE. ONLY A PRESENCE OF 75% OR MORE IN CLASS (at least 18 lectures) GIVES A STUDENT THE STATUS OF "ATTENDING". ONLY ATTENDING STUDENTS PARTICIPATE TO ACTIVE LEARNING: HOMEWORKS AND POSTER SESSION.
NON-ATTENDING STUDENTS ARE REQUIRED TO STUDY THE TEXTBOOK, READING ALL THE MATERIAL UPLOADED ON MOODLE PLATFORM AND TAKE THE FINAL TEST.

Optionally, students might study over the digital tool www.MyEconLab.com to get acquainted with interactive graphics, questions, and all the material in
the chapters.
The teacher will mix traditional slides and videos with a dynamic interactive mode.

AS FAR AS ATTENDING STUDENTS, their final evaluation of knowledge (KN), applied knowledge (AKN), making judgements (MJ), learning (LS) and communication skills (CS) about IE is based on these components:

1) Students are required to solve INDIVIDUALLY simple homework and critically discuss the issues in class, once per week (AKN), (MJ) with a maximum of three homework.

2) By December, students will prepare a POSTER on a topic of their choice (from a list of topics provided by the teacher) and present it in a POSTER SESSION, to experiment COMMUNICATION techniques related to International Economics. This is a TEAM work; the teacher will set each team and evaluate both the team work and each individual capacity/knowledge (AKN), (LS), (CS).
More details and instructions will be given at the beginning of the course.

3) Final test. Students are required to answer theoretical open questions and solve for exercises (KN), (MJ), (LS).

Assessment Methods

ATTENDING students' final evaluation of knowledge (KN), applied knowledge (AKN), making judgements (MJ), learning (LS) and communication skills (CS) about IE is based on three components:

1) Each student solves INDIVIDUALLY simple homeworks (exercises or data analysis with graphs or tables) and briefly but critically discusses the issues in class, once a week (AKN), (MJ)

2) By December, students prepare a POSTER on a topic of their choice (from a list provided by the teacher) and present it in a POSTER SESSION, to experiment COMMUNICATION techniques related to International Economics. This is a TEAM work, and the teacher sets each team. An evaluation of the work is given to the team and to each individual (AKN), (MJ), (LS), (CS).
More details and instructions are provided at the beginning of the course.

3) Written Fina Test. Each student answers theoretical and technical questions, solving for exercises, about international economics (KN), (AKN), (LS).

Assessment method:
Each of the requested activities has a specific weight in the final evaluation:

[20%]: 1) Homeworks.

[40%]: 2) Poster session active participation at the end of the course.

[40%]: 3) Written final test at the end of the course (starting from January at official dates).

Final mark goes from minimum 18 (D) points to 30 points (A). If the total evaluation is <18 (F) the preparation is not considered adequate and the student needs to retake the written test (only). In some cases, for excellent preparation, a student may get 30 points 'cum laude' (A+).

NON-ATTENDING students are evaluated only on their performance in the Final Test (100%), which is an extended version of the final test for attending students.

Assessment:

Final Mark

Programme of Educational Activities

Start date of teaching period:

Monday, September 9, 2019

End date of teaching period:

Friday, December 13, 2019

Other Information

Students are expected to attend the lectures, study the main textbook, looking at the slides, solve for homework, and read suggested readings for in-depth analysis. However,

RULES FOR NON ATTENDING STUDENTS:
Slides will be distributed to facilitate comprehension on the Moodle platform.
Office hours and email are available tools to contact the teacher.
They MAY start a forum on Moodle platform to get answers from the Community of other students and the teacher.
They HAVE access to past exam questions on Moodle.
They MUST take the final test (starting from January) to pass the exam.
Their final grade is based on final test only.
In exceptional, serious and rare cases, the teacher (at her discretion) might allow non attending students to take an oral exam after the written test.

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