UAB banner

Timothy J. Kehoe

Recent Developments in Trade Theory and its Applications

Universitat Autònoma de Barcelona

June 2008

 

Class notes

Notes on models with heterogeneous firms

 

Lecture 1.  The New Trade Theory and its Applications

Questions:

1.    Why has merchandise trade grown so much faster than manufacturing output? 

2.    Why did the applied general equilibrium models used to analyze the impact of NAFTA fail to predict which sectors would have the largest increases in trade? 

Readings:

R. Bergoeing and T. J. Kehoe, “Trade Theory and Trade Facts,” Federal Reserve Bank of Minneapolis, 2003. 

T. J. Kehoe,  “An Evaluation of the Performance of Applied General Equilibrium Models of the Impact of NAFTA,” in T. J. Kehoe, T. N. Srinivasan, and J. Whalley, editors, Frontiers in Applied General Equilibrium Modeling:  Essays in Honor of Herbert Scarf, Cambridge University Press, 2005, 341-77. 

P. J. Kehoe and T. J. Kehoe, “A Primer on Static Applied General Equilibrium Models,” Federal Reserve Bank of Minneapolis Quarterly Review, 18:2 (1994), 2-16. 

T. J. Kehoe, C. Polo, and F. Sancho, “An Evaluation of the Performance of an Applied General Equilibrium Model of the Spanish Economy,” Economic Theory, 6 (1995), 115-141.  

J. Markusen, “Explaining the Volume of Trade: An Eclectic Approach,” American Economic Review, 76 (1986), 1002-1011. 

K.-M. Yi, “Can Vertical Specialization Explain the Growth of World Trade? Journal of Political Economy, 111 (2003), 52-111.

 

Lecture 2.  Trade Models with Heterogeneous Firms

Questions:

3.    From which products does the growth in exports come after trade liberalization, from products with large exports volumes before the liberalization or from those with small export volumes?

4.    Why is the distribution of exporters in an industry so different from the overall distribution of firms?

Readings:

T. Chaney, “Distorted Gravity: Heterogeneous Firms, Market Structure, and the Geography of International Trade,” University of Chicago, 2005. 

J. Eaton, S. Kortum, and F. Kramarz, “An Anatomy of International Trade:  Evidence from French Firms,” University of Minnesota, 2005. 

T. J. Kehoe and K. J. Ruhl, “How Important is the New Goods Margin in International Trade?” Federal Reserve Bank of Minneapolis, 2002.

M. J. Melitz, “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.” Econometrita, 71 (2003), 1695-1725. 

K. J. Ruhl, “Solving the Elasticity Puzzle in International Economics,” University of Texas at Austin, 2005. 

 

Lecture 3.  Trade Models with Heterogeneous Firms:  Alternative Specifications

Questions:

5.    Researchers have focused on the decisions of firms to export.  Why not study the decision to import?

6.    Are there theoretical alternatives to the fixed costs assumed most researchers that can allow models to better account for the data?

Readings:

C. Arkolakis, “Market Access Costs and the New Consumers Margin in International Trade,” University of Minnesota, 2006. 

A. Ramanarayanan, “International Trade Dynamics with Intermediate Inputs,” University of Minnesota, 2006. 

 

Lecture 4.  Trade and Growth

Questions:

7.    Do standard models of trade predict that trade liberalization will increase growth rates? 

8.    How do the concepts of productivity used by researchers in the theoretical literature on international trade compare with the concepts used by researchers in the empirical literature?

Readings:

C. Bajona and T. J. Kehoe, Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model,” Federal Reserve Bank of Minneapolis Staff Report 378, 2006.

M. J. Gibson, Trade Liberalization, Reallocation, and Productivity,” University of Minnesota, 2006. 

T. J. Kehoe and K. J. Ruhl, “Are Shocks to the Terms of Trade Shocks to Productivity?” Federal Reserve Bank of Minneapolis, 2007. 

M. Roberts and R. Tybout, “The Decision to Export in Colombia :  An Empirical Model of Entry with Sunk Costs.” American Economic Review, 87 (1997), 545-564. 

F. Rodriguez and D. Rodrik, “Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence,” in B. Bernanke and K. Rogoff, editors, Macroeconomics Annual 2000, MIT Press, 2001, 261-325.

J. Ventura, “Growth and Interdependence,” Quarterly Journal of Economics, 112 (1997), 57-84. 


 Home Page | Research | Publications | C.V. | Teaching | Computation | Personal | Data  

URL: http://www.econ.umn.edu/~tkehoe/classes/uab-08.html/ 

© 2008 by the Regents of the University of Minnesota.
All rights reserved. 
Comments to: tkehoe@econ.umn.edu 
Last modified: 16 June 2008 2:43