FIRMS IN INTERNATIONAL TRADE

Time & place:






Lecture:

Thursdays, 8:30 – 10:00 Uhr




Room:






Start:






Examination:






Exam:

90 Min. (6 CP)




Examination date:






Examination requirements:

Demonstrate knowledge of the modern theoretical models used to explain trade patterns within industries and at the firm level

show that they are able to analyse the welfare and distributional effects of international trade and offshoring within this framework.

Requirements:

none




Recommended prior knowledge:

Microeconomics, International Trade




Learning outcome, core skills:

Upon successful completion of the course, students will be able to:

Provide an overview of the main features of world trade patterns that cannot be explained by traditional trade theories based on comparative advantage

understand and explain how models with firms in an imperfectly competitive environment can explain the main empirical regularities of current trade flows,

analyse the welfare effects of openness to international trade in a world with heterogeneity of firms

analyse and explain the new distributional effects of international trade that arise from firm heterogeneity.

Content of the lecture:

I. Intra-Industry Trade and the Krugman Model

Discussion of the empirical evidence for intra-industry trade. In-depth analysis of the Krugman model as an explanation for the discussed evidence. Extensions of the model take into account the coexistence of intra- and inter-industry trade, the home-market effect, and multilateral trade flows in the gravity equation.



II. International Trade and Firm Heterogeneity

Discussion of the empirical evidence for trade patterns at the firm level. In-depth analysis of the monopolistic competition model with firm heterogeneity and international trade in final goods as an explanation for the discussed evidence. Effects of trade liberalization on individual firms, income distribution, and overall welfare.



III. Offshoring and Firm Heterogeneity

Discussion of the empirical evidence on the relationship between firm characteristics and the incidence of offshoring. Modelling of the offshoring decision at the firm level and its connection to general equilibrium outcomes regarding welfare, firm-level employment, and income distribution.



IV. Effects of International Trade on the Labor Market

Discussion of the empirical evidence linking firm characteristics and export behavior to wages at the firm level. Analysis of the effects of international trade on welfare, income distribution, and unemployment, taking into account firm heterogeneity and labor market imperfections.





Recommended literature: