Timothy J. Kehoe


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Topics in International Trade
Banco de Portugal
January 2016

Reading list

Class Notes

Notes on Monopolistic Competition

Notes on Ricardian Models with a Continuum of Goods

Notes on Dynamic Heckscher-Ohlin Models

Notes on Monopolistic Competition and Trade with Heterogeneous Firms

Klaus Desmet’s Notes on the Eaton-Kortum Model

Analytical Exercises:

Comparative Advantage

Monopolistic Competition

Dynamic Trade

New Products Margin Exercises:

Portugal to Spain 1988–2008

Spain to Portugal 1988–2008

Notes on Sequencing of Policy Reforms

Notes on Stages of Growth

Stages of Growth Revisited: Part I, Part II

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.

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,” American Economic Review 98 (2008), 1707–1721.

J. Eaton, S. Kortum, and F. Kramarz, “An Anatomy of International Trade: Evidence from French Firms,” Econometrica, 79 (2011), 1453–1498.

T. J. Kehoe, J. M. Rossbach, and K. J. Ruhl, “Using the New Products Margin to Predict the Industry-Level Impact of Trade Reform,” Federal Reserve Bank of Minneapolis, 2013.

T. J. Kehoe and K. J. Ruhl, “How Important is the New Goods Margin in International Trade?” Journal of Political Economy, 121 (2013), 358–392.

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

K. J. Ruhl, “Solving the Elasticity Puzzle in International Economics,” University of Texas at Austin, 2008.

3. Trade and Growth

Questions

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

6. 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

J. Asturias, S. Hur, T. J. Kehoe, and K. J. Ruhl, “The Interaction and Sequencing of Policy Reforms,” Federal Reserve Bank of Minneapolis, 2016.

C. Bajona and T. J. Kehoe, “Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model,” Review of Economic Dynamics, 13 (2010), 487–513.

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?” Review of Economic Dynamics, 11 (2008), 804–819.

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.

A. Young, "Learning by Doing and the Dynamic Effect of International Trade," Quarterly Journal of Economics, 106 (1991), 369-405.