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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. Lectures 1-3give a brief introduction to issues in international trade. Lectures 4-12look at classical trade theories. We will look at some explanations of why countries engage in international trade. We will see 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 specialize 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 lose from trade even if there are overall gains from trade.Lectures 13-14 discuss 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. Lectures 15-24 looks at what happens to the welfare of countries and its 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. free trade areas.
1. 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)2. 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)3. Be able to use basic models to analyse intra-industry trade. (Final exam)4. 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.
Biculturally competent and confident
Students will be aware of and understand the nature of biculturalism in Aotearoa New Zealand, and its relevance to their area of study and/or their degree.
Engaged with the community
Students will have observed and understood a culture within a community by reflecting on their own performance and experiences within that community.
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 & policy
Domestic fee $868.00
International fee $4,075.00
* All fees are inclusive of NZ GST or any equivalent overseas tax, and do not include any programme level discount or additional course-related expenses.
For further information see
Department of Economics and Finance