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Microeconomic analysis of international trade, trade policy, the welfare implications of trade and trade policy. The political economy of trade liberalisation.
ECON222 applies microeconomic theory to the analysis of international trade and trade policy. Part 1 gives a brief introduction to issues in international trade. Parts 2 and 3 look at classic trade theories. We will examine several reasons for countries wanting to engage in international trade. We will find that countries that differ either in technology or in input endowments gain from trading with each other, i.e., that trade is not a zero-sum game but offers mutual gains. Gains from trade arise because it allows for countries to specialise in what they are relatively good at, i.e., where their comparative advantage is. We will discuss how trade affects the distribution of income within a country. In particular, we will see that some interest groups may be hurt from trade even if the people on the average gain.Part 4 discusses modern trade theories, which utilise models of imperfect competition and game theory. We will see that even countries that have the same technology and endowments, i.e., that do not possess a comparative advantage in anything, can gain from trade. Modern trade theories can explain why we observe intra-industry trade, i.e., countries exporting and importing the same or similar goods.Part 5 looks at what happens to the welfare of countries and their various interest groups when countries that already engage in trade start using trade policy (tariffs, quotas, export subsidies, etc.) to limit trade flows. We will discuss the merits of the most common arguments for restricting trade. We will also analyse the welfare consequences of regional trade arrangements, i.e., partial integration.
LO1: Be able to discuss the key post-WWII international trade trends and institutions as well as New Zealand’s trade policy and key export and import goods and markets. (Term test, final exam)LO2: Be able to use the Ricardian and Heckscher-Ohlin models to analyse trade patterns, the effects of trade on consumption, production and the welfare of the different interest groups and the countries as a whole. (Term test, final exam)LO3: Be able to use basic models to analyse intra-industry trade. (Final exam)LO4: Be able to define and analyse the welfare effects of the most important trade policy instruments as well as regional free trade agreements. (Final exam)
This course will provide students with an opportunity to develop the Graduate Attributes specified below:
Critically competent in a core academic discipline of their award
Students know and can critically evaluate and, where applicable, apply this knowledge to topics/issues within their majoring subject.
Employable, innovative and enterprising
Students will develop key skills and attributes sought by employers that can be used in a range of applications.
Students will comprehend the influence of global conditions on their discipline and will be competent in engaging with global and multi-cultural contexts.
Students must attend one activity from each section.
Krugman, Paul R. , Obstfeld, Maurice, Melitz, Marc J;
International trade : theory and policy;
Tenth edition, Global edition;
Pearson Education Limited, 2015.
This book is recommended for gaining better understanding of the topics discussed in class. The book is available in the bookstore, in restricted loans in the Library and as an eTextbook from the publisher’s website: http://www.pearsoned.co.nz/9781292060439
Domestic fee $806.00
International fee $3,513.00
* Fees include New Zealand GST and do not include any programme level discount or additional course related expenses.
For further information see
Department of Economics and Finance.