International trade: theory & policy

Cover......Page 1
Title Page......Page 4
Copyright Page......Page 5
Brief Contents......Page 6
Contents......Page 8
Preface......Page 14
1 Introduction......Page 24
 What Is International Economics About?......Page 26
  The Gains from Trade......Page 27
  How Much Trade?......Page 28
  Balance of Payments......Page 29
  International Policy Coordination......Page 30
  The International Capital Market......Page 31
 International Economics: Trade and Money......Page 32
  Who Trades with Whom?......Page 33
   Size Matters: The Gravity Model......Page 34
   Using the Gravity Model: Looking for Anomalies......Page 36
   Impediments to Trade: Distance, Barriers, and Borders......Page 37
   Has the World Gotten Smaller?......Page 39
   What Do We Trade?......Page 41
   Service Offshoring......Page 42
  Do Old Rules Still Apply?......Page 44
  Summary......Page 45
 3 Labor Productivity and Comparative Advantage: The Ricardian Model......Page 47
  The Concept of Comparative Advantage......Page 48
  A One-Factor Economy......Page 49
   Relative Prices and Supply......Page 51
  Trade in a One-Factor World......Page 52
   Determining the Relative Price after Trade......Page 53
    Box: Comparative Advantage in Practice: The Case of Usain Bolt......Page 56
   The Gains from Trade......Page 57
   A Note on Relative Wages......Page 58
    Box: Economic Isolation and Autarky over Time and Space......Page 59
   Productivity and Competitiveness......Page 60
    Box: Do Wages Reflect Productivity?......Page 61
   Exploitation......Page 62
   Relative Wages and Specialization......Page 63
   Determining the Relative Wage in the Multigood Model......Page 65
  Adding Transport Costs and Nontraded Goods......Page 67
  Empirical Evidence on the Ricardian Model......Page 68
  Summary......Page 71
 4 Specific Factors and Income Distribution......Page 74
  The Specific Factors Model......Page 75
   Assumptions of the Model......Page 76
   Production Possibilities......Page 77
   Prices, Wages, and Labor Allocation......Page 80
   Relative Prices and the Distribution of Income......Page 84
  International Trade in the Specific Factors Model......Page 86
  Income Distribution and the Gains from Trade......Page 87
  The Political Economy of Trade: A Preliminary View......Page 90
   Case Study: Trade and Unemployment ......Page 91
  International Labor Mobility......Page 95
   Case Study: Wage Convergence in the European Union ......Page 97
   Case Study: Immigration and the U.S. Economy: Future Prospects ......Page 99
  Summary......Page 102
 5 Resources and Trade: The Heckscher-Ohlin Model......Page 110
   Prices and Production......Page 111
   Choosing the Mix of Inputs......Page 114
   Factor Prices and Goods Prices......Page 116
   Resources and Output......Page 119
  Effects of International Trade  between Two-Factor Economies......Page 120
   Relative Prices and the Pattern of Trade......Page 121
   Trade and the Distribution of Income......Page 122
   Case Study North-South Trade and Income Inequality......Page 123
   Skill-Biased Technological Change and Income Inequality......Page 125
    Box: The Declining Labor Share of Income and Capital-Skill Complementarity ......Page 129
   Factor-Price Equalization......Page 130
  Empirical Evidence on the Heckscher-Ohlin Model......Page 131
   Trade in Goods as a Substitute for Trade in Factors: Factor Content of Trade......Page 132
   Patterns of Exports between Developed and Developing Countries......Page 135
   Implications of the Tests......Page 137
  Summary......Page 138
 6 The Standard Trade Model......Page 146
   Production Possibilities and Relative Supply......Page 147
   Relative Prices and Demand......Page 148
   The Welfare Effect of Changes in the Terms of Trade......Page 151
   Case study: Unequal Gains from Trade across the Income Distribution......Page 152
   Growth and the Production Possibility Frontier......Page 155
   World Relative Supply and the Terms of Trade......Page 157
   International Effects of Growth......Page 158
   Case Study: Has the Growth of Newly Industrializing Economies Hurt Advanced Nations?......Page 159
   Relative Demand and Supply Effects of a Tariff......Page 161
   Effects of an Export Subsidy......Page 162
   Implications of Terms of Trade Effects: Who Gains and Who Loses?......Page 163
   Intertemporal Production Possibilities and Trade......Page 164
   The Real Interest Rate......Page 165
  Summary......Page 167
 7 External Economies of Scale and the International Location of Production......Page 174
  Economies of Scale and International Trade: An Overview......Page 175
  Economies of Scale and Market Structure......Page 176
  Specialized Suppliers......Page 177
  Labor Market Pooling......Page 178
  Knowledge Spillovers......Page 179
   External Economies and Market Equilibrium......Page 180
   External Economies, Output, and Prices......Page 181
   External Economies and the Pattern of Trade......Page 182
    Box: Holding the World Together......Page 184
   Trade and Welfare with External Economies......Page 185
   Dynamic Increasing Returns......Page 186
  Interregional Trade and Economic Geography......Page 187
   Box: Soccer and the English Premiere League......Page 189
  Summary......Page 190
 8 Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises......Page 193
  The Theory of Imperfect Competition......Page 194
   Monopoly: A Brief Review......Page 195
   Monopolistic Competition......Page 197
   The Effects of Increased Market Size......Page 202
   Gains from an Integrated Market: A Numerical Example......Page 203
   The Significance of Intra-Industry Trade......Page 207
   Case Study: Automobile Intra-Industry Trade within Asean-4: 1998–2002......Page 209
  Firm Responses to Trade: Winners, Losers, and Industry Performance......Page 210
   Performance Differences across Producers......Page 211
   The Effects of Increased Market Size......Page 213
  Trade Costs and Export Decisions......Page 215
  Dumping......Page 217
  Case study: Antidumping as Protectionism......Page 218
  Case study: Patterns of FDI Flows around the World......Page 220
  The Firm’s Decision Regarding Foreign Direct Investment......Page 224
   Outsourcing......Page 225
   Box: Whose Trade Is It?......Page 226
   Case Study: Shipping Jobs Overseas? Offshoring and Labor Market Outcomes in Germany......Page 228
   Consequences of Multinationals and Foreign Outsourcing......Page 231
  Summary......Page 232
  Basic Tariff Analysis......Page 238
   Supply, Demand, and Trade in a Single Industry......Page 239
   Effects of a Tariff......Page 241
   Measuring the Amount of Protection......Page 242
   Consumer and Producer Surplus......Page 244
   Measuring the Costs and Benefits......Page 246
   Box: Tariffs and Retaliation......Page 248
   Export Subsidies: Theory......Page 250
   Case Study: Europe’s Common Agricultural Policy......Page 251
   Import Quotas: Theory......Page 252
   Case Study: Tariff-Rate Quota Origin and its Application in Practice with Oilseeds......Page 253
   Voluntary Export Restraints......Page 256
   Case Study: A Voluntary Export Restraint in Practice......Page 257
   Local Content Requirements......Page 258
   Box: Healthcare Protection with Local Content Requirements......Page 259
  The Effects of Trade Policy: A Summary......Page 260
  Summary......Page 261
 10 The Political Economy of Trade Policy......Page 269
   Free Trade and Efficiency......Page 270
   Additional Gains from Free Trade......Page 271
   Political Argument for Free Trade......Page 272
   The Terms of Trade Argument for a Tariff......Page 273
   The Domestic Market Failure Argument against Free Trade......Page 274
   How Convincing Is the Market Failure Argument?......Page 276
  Income Distribution and Trade Policy......Page 277
   Electoral Competition......Page 278
   Collective Action......Page 279
   Box: Politicians for Sale: Evidence from the 1990s......Page 280
   Who Gets Protected?......Page 281
  International Negotiations and Trade Policy......Page 283
   The Advantages of Negotiation......Page 284
   International Trade Agreements: A Brief History......Page 285
   Trade Liberalization......Page 287
   Administrative Reforms: From the GATT to the WTO......Page 288
   Benefits and Costs......Page 289
   Box: Settling a Dispute—And Creating One......Page 290
   Case study: Testing the WTO’s Metal......Page 291
  The End of Trade Agreements?......Page 292
   Box: Do Agricultural Subsidies Hurt the Third World?......Page 293
   Preferential Trading Agreements......Page 294
   Box: Free Trade Area Versus Customs Union......Page 295
   Box: Brexit......Page 296
   Case study: Trade Diversion in South America......Page 297
   The Trans-Pacific Partnership......Page 298
  Summary......Page 299
 11 Trade Policy in Developing Countries......Page 306
   The Infant Industry Argument......Page 307
   Promoting Manufacturing through Protection......Page 309
   Case Study: Export-Led Strategy......Page 311
  Results of Favoring Manufacturing:  Problems of Import-Substituting Industrialization......Page 312
  Trade Liberalization since 1985......Page 314
  Trade and Growth: Takeoff in Asia......Page 316
  Summary......Page 318
 12 Controversies in Trade Policy......Page 321
   Technology and Externalities......Page 322
   Imperfect Competition and Strategic Trade Policy......Page 325
    Box: A Warning from Intel’s Founder......Page 327
   Case Study: When the Chips Were Up......Page 328
   The Anti-Globalization Movement......Page 330
   Trade and Wages Revisited......Page 331
   Environmental and Cultural Issues......Page 333
   The WTO and National Independence......Page 334
   Case Study: A Tragedy in Bangladesh......Page 335
   Globalization, Growth, and Pollution......Page 336
   The Problem of “Pollution Havens”......Page 338
   The Carbon Tariff Dispute......Page 339
  Trade Shocks and Their Impact on Communities......Page 340
  Summary......Page 341
   Factor Prices and Costs......Page 344
   Goods Prices and Factor Prices......Page 346
   Factor Supplies and Outputs......Page 347
   Supply, Demand, and Equilibrium......Page 348
   Supply, Demand, and the Stability of Equilibrium......Page 350
   Economic Growth......Page 352
   A Transfer of Income......Page 353
   A Tariff......Page 354
  Postscript to Chapter 8: The Monopolistic Competition Model......Page 356
Index......Page 358
Credits......Page 367