58606 - Topics in International Trade

Academic Year 2023/2024

  • Teaching Mode: Traditional lectures
  • Campus: Forli
  • Corso: Second cycle degree programme (LM) in International Relations and Diplomatic Affairs (cod. 9247)

    Also valid for Second cycle degree programme (LM) in International Politics and Economics (cod. 5702)

Learning outcomes

The aim of the class is to enable students to go through advanced topics in international economic integration. Mainstream recent theoretical and empirical contributions on trade will be presented. Specific emphasis will be devoted to trade policies, income distribution and welfare effects of trade restrictions, trade and environment, geographic agglomeration. The last section of the lectures will dwell on social choices and/or political economy of trade.

Course contents

Learning outcomes (updated). Trade and Geography in the World Economy: The first part of the course presents in an advanced yet tractable manner theories of international trade and economic geography that describe the forces shaping the distribution of economic activity across space, and the consequences that agglomeration and dispersion forces have at the world level on economic outcomes such as prices, trade flows, wages, and welfare. Political outcomes such as voting behaviour are also analyzed. The course is centred around models of both perfect and imperfect competition, and considers more recent extensions, such as those assuming production heterogeneity and aiming at an exact quantification of the models’ properties. The second part of the course is devoted to empirical applications, where papers with a structural approach to the estimation of the models’ parameters are presented. The final empirical application is a Lab focusing on the structural estimation of gravity equations of trade, a key tool for trade policy analysis.

Prerequisites: Knowledge of undergraduate International Economics (to the equivalent of 25751), and of undergraduate Econometrics (to the equivalent of 93674) are strongly recommended. Students are expected to have previous knowledge of some software for statistical computing, such as Stata or R.

A) Introduction: The economic and political consequences of international trade shocks

The China trade shock in the US

Electoral consequences of rising trade exposure (Autor et al.) [Slides]

B) Space, trade and agglomeration

Some stylized facts [Slides]

The Dixit-Stiglitz model of monopolistic competition [Slides]

Trade, agglomeration and market size [Slides]

The Core-Periphery model (Krugman) [Slides]

The gravity equations of trade. Trade flows in a generalized CES Armington model. The fixed effect gravity estimator. The ratio gravity estimator. [Slides]

Economic geography and international inequality (Redding-Venables) [Slides]

The costs of remoteness: Evidence from German division and reunification (Redding-Sturm) [Slides]

C) Trade models under production heterogeneity

Trade and gravity with production heterogeneity. Perfect competition (Eaton-Kortum). [Slides]

D) International trade Lab

Lab on the estimation of gravity equations. The CEPII BACI database. The CEPII Gravity database. [Material on Virtuale]


Bibliographic references

Allen T., Arkolakis C. (2016) Elements of Advanced International Trade, Yale University. Online manuscript.

Combes P.-P., Mayer T., Thisse J.-F. (2008) Economic Geography: The Integration of Regions and Nations, Princeton University Press. ISBN: 978-0-691-13942-5. Three copies of this textbook are available at the Central Library Roberto Ruffilli (two copies are available for borrowing, the other is not).

Another useful textbook is: Fujita M., Krugman P., Venables A.J. (1999) The spatial economy: cities, regions and international trade, MIT Press. ISBN: 978-0-262-56147-1. A copy of this textbook is available at the Central Library Roberto Ruffilli.

Compulsory papers readings

Autor D., Dorn D., Hanson G., Majlesi K. (2020) Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure. American Economic Review, 110, 3139-3183.

Eaton J., Kortum S. (2002) Technology, Geography, and Trade, Econometrica, 70, 1741-1779.

Fontagné L., Guimbard H., Orefice G. (2022) Tariff-based product-level trade elasticities, Journal of International Economics, 137, article number: 103593.

Redding S., Sturm D. (2008) The Costs of Remoteness: Evidence from German Division and Reunification, American Economic Review, 98, 1766-1797.

Redding S., Venables A.J. (2004) Economic Geography and International Inequality, Journal of International Economics, 62, 53-82.

Supplementary readings

Economic Sciences Nobel Prize Committee (2008) Trade and Geography - Economies of Scale, Differentiated Products and Transport Costs, Royal Swedish Academy of Sciences. Online scientific background.

Bacchetta M. et al. (2012) A Practical Guide to Trade Policy Analysis, World Trade Organization. Online guide.

Yotov Y.V., Piermartini R., Monteiro J.-A., Larch M. (2016) An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model, World Trade Organization. Online guide.

Teaching methods

On-campus teaching with full set of video recorded lectures available on the Panopto platform. Please visit the dedicated website.

Assessment methods

The exam consists of two sections, A (theory) and B (empirics). Students need to answer to two out of three questions from section A, and to the question in section B. The exam consists of commenting and explaining the analytical relations and econometric output tables that were presented during the class. The exam does not involve the derivation of any analytical result, but it requires only to comment and explain.

Old exam questions are available for students at this link.

In case of a positive final mark the student has the right to renege on the mark only once.

Teaching tools

Lecture Notes are created with Microsoft OneNote and are immediately shared with students.

Video recorded lectures are available on the Panopto platform. Please visit the dedicated website.

Office hours

See the website of Gaetano Alfredo Minerva