International Trade
|
|
- Norah Jennifer Dawson
- 6 years ago
- Views:
Transcription
1 4.58 International Trade Class notes on 5/6/03 Trade Policy Literature Key questions:. Why are countries protectionist? Can protectionism ever be optimal? Can e explain ho trade policies vary across countries, industries, and time?. Ho should trade agreements be designed? Can e explain the main institutional features of actual trade agreements (e.g. WTO, NAFTA, EU)? In order to shed light on these questions, one needs to take a stand on:. Economic environment: What is the market structure? Are there distortions, e.g. unemployment or pollution?. Political environment: What is the objective function that governments aim to maximize, e.g. social elfare, elfare of the median voter, political support? What are the trade policy instruments, e.g. import tari s, quotas, product standards? Are trade policy instruments the only instruments available? 3. Constraints on the set of feasible contracts: Do trade agreements need to be self-enforcing? Ho costly is it "to complete contracts? In this Lecture e ill restrict ourselves to environments such that:. All markets are perfectly competitive. There are no distortions 3. Governments only care about elfare Only motive for trade protection is price manipulation Consumers and rms are price-takers on orld markets Governments internalize that exports and imports a ect prices We ill be focusing on three questions:. Ho should trade taxes vary across countries and industries?. Quantitatively ho important are the gains from such manipulation? 3. What is the rationale for trade agreements in this environment? The notes are based on lecture slides ith inclusion of important insights emphasized during the class.
2 A First Look at Unilaterally Optimal Tari s. Economic Environment Consider a orld economy ith countries, c = ; There are to goods, i = ;, both produced under perfect competition good is used as the numeraire, p = Notations: p c p c =p c is relative price in country c p p =p is orld (i.e. untaxed) relative price d c i (pc ; p ) is demand of good i in country c yi c (pc ) is supply of good i in country c Country () is a natural importer of good (): m p ; p d (p ; p ) y p > 0 m p ; p d (p ; p ) y p > 0 x p ; p y(p ) d p ; p > 0 x p ; p y (p ) d p ; p > 0 Trade is balanced: p m p ; p = x p ; p m p ; p = p x p ; p Market clearing for good requires: x p ; p = m p ; p (). Political Environment.. Policy instruments Both governments can impose an ad-valorem tari t c on their imports p c c = ( + t c ) p c c = p c p c Tari s create a edge beteen the orld and local prices hich implies p = + t p () p = p = + t (3)
3 Comments: If the only taxes are import tari s, then local prices faced by consumers and producers are the same, as implicitly assumed in our previous slides Equations ()-(3) implicitly de ne p p t ; t and p c p c (t c ; p ).. Government s objective function Both governments are elfare-maximizer. They simultaneously set t c in order to maximize utility of representative agent here: c max V c (p c ; I c ) V [p c ; R c (p c ) + T c (p c ; p )] (4) t c R c (p c ) max y fp c y + p c y jy feasibleg p p m T c (p c ; p ) t c p c mc c (p c ; p ) = p =p p ; p if = ; p c m p ; p ; p p if c = satisfy Equations () (3)..3 Unilaterally Optimal Tari s Proposition For both countries, unilaterally optimal (Nash) tari s satisfy t c d ln x c =, here " c " c d ln p Proof:. For expositional purposes e focus on country. FOC )! p dp dr dp + dt dp dt V V I. Roy s identity ) V p V = I dm p ; p + dt p ; p + t p dt d (p ; p ) 3. Perfect competition ) dr = y dp (p ; p ) d ln m (p ;p ) ) ln p = dt market clearing, m p ; p = x p ; p ) t = =" Ho Should Tari s Vary Across Countries (and Industries)? = 0 3
4 Proposition o ers a simple theory of tari formation: tari s inverse of the elasticity of foreign export supply this is true hether or not the other government is imposing its Nash tari though other government s tari does a ect elasticity of foreign export supply In the case of a small = 0 ) " = + a small open economy never has an incentive to impose a tari Import tari s are intimately related to countries market poer it is countries ability to improve their terms-of-trade that lead to strictly positive tari s Potential concerns about Proposition as a positive theory:. Do e really believe that governments maximize elfare?. Ho many countries are large enough to a ect their terms-of-trade? 3. Do trade negotiators really care about their terms-of-trade? 3 The Primal Approach So far e have focused on a speci c policy instrument: import tari s It is often easier to proceed in to steps:. Solve for the optimal allocation assuming that governments can directly choose output and consumption. Sho ho that allocation can be implemented using trade taxes Formally, the planning problem of country can be expressed as: max U m + y; m + y m ;m ;y ;y subject to: p m m + m = 0 F y; y 0 st constraint Trade balance; nd constraintppf p m inverse of country s export supply curve, i.e., orld price at hich country is illing to export m units of good to country 4
5 3. Optimal Wedges FOC associated ith m imply Intuition: U = U dp p + m dm = Country has monopsony poer MC of imports p + price increase infra-marginal units m dp dm At the optimum, there is a edge beteen MRS and orld price U = p d ln p U + d ln m The more elastic orld prices are, the bigger the edge is 3. Implementation In a competitive equilibrium, U c =U c domestic price in country d ln p d ln m so optimum can be implemented by creating a edge of size + beteen the domestic price and the orld price To natural candidates: Import tari t d ln p U Export tax equal to = +" () = p = ( Many other possible instruments: U = = () = p ( + t ) d ln m " ) U optimum U optimum )) Any combination of import tari s and export taxes s.t. ( + t ) = ( ) = d ln p + d ln m Identical consumption and production taxes Quantitative restrictions 5
6 3.3 Foreign Export Supply versus Foreign Import Demand Same result applies if e focus on country s import demand curve Let p~ m inverse of country s import demand curve p () and p~ satisfy p m (p ) = m (p ) ( ) The elasticities of foreign export supply, " d ln m d ln p (= d ln p ) and import demand, d ln(m ) d ln p (= ) thus satisfy + d ln p~ =d ln m " =. Using the same logic as before, one can sho that U p = U (d ln p~ =d ln m ) Thus optimal export tax should be equal to 3.4 Beyond To-ness d ln p~ ~ = = = = d ln m. + " =d ln m, To-good model is simple because only one relative price to keep track of Ho do the previous insights generalize to many goods? If p i only depends on m i, then results trivially extend (e.g. quasilinear preferences abroad + speci c factor model) But in general, one ould need to take into account that orld price of good i may also depend on imports of other goods (Dixit 985, Bond 990) In such situations, export subsidies may be optimal (Feenstra 986) A simple case that can be ork out analytically: Additive separability (natural in macro context)+ endoment economy; see Costinot, Lorenzoni, and Werning (03) 4 Quantitative Issues 4. Back to Armington Model The simplest place to start to get a sense of the quantitative importance of terms-of-trade motive is to go back to Armington model 6
7 In line ith previous analysis assume that: there are only to countries, and country is endoed ith e units of good (so that it is still a natural importer of good ) country is endoed ith e units of good (so that it is still a natural importer of good ) Representative agents have CES utility ith elasticity : c c U = (d ) + (d c ) Trade beteen and is subject to iceberg trade costs 4. Unilaterally Optimal Tari Armington model ith to countries is special case of models studied before. So e only need to compute elasticity of country s export supply Given endoment and CES assumptions e have p e (p ) e x (p ) = e = + (p ) + (p ) Country s export supply is thus given by d ( " ln x ( ) p ) = = d ln p + (p ) p d (p ) Let p = e ( ) +(p ) denote country s share of expenditure on its on good Using this notation, the optimal tari in country is given by t = ( ) 4.3 A First Look at Numbers Previous formula o ers simple ay to quantify optimal tari : From gravity equation e kno that ' 5 From most countries, ROW is almost under autarky, ' Thus previous formula suggests t ' 0% 7
8 Next e ill go through quantitative results from Costinot and Rodriguez- Clare (03) in more general gravity models Results suggest that this is not a bad approximation See also Ossa (0a, 0b) Analytically, one can sho that previous formula also applies to gravity models featuring monopolistic competition ith homogeneous rms à la Krugman (980); see Gros (987) and Helpman and Krugman (989) Compared to analysis in ACR, e only have to countries, no rm heterogeneity, no tari revenues in country. Not clear that equivalence ould still hold ithout these strong assumptions 4.3. What Do Unilaterally Optimal Tari s Look Like? Costinot and Rodriguez-Clare (03) Courtesy of Arnaud Costinot and Andrés Rodriguez-Clare. Used ith permission What Are the Welfare Consequences of 40% a Tari? Costinot and Rodriguez-Clare (03) 8
9 Courtesy of Arnaud Costinot and Andrés Rodriguez-Clare. Used ith permission Ho Important is Monopolistic Competition? Costinot and Rodriguez-Clare (03) Courtesy of Arnaud Costinot and Andrés Rodriguez-Clare. Used ith permission. 4.4 Summary of Welfare E ects in Gravity Models Welfare gains from unilateral import tari s over surprisingly large range In one-sector Armington model, unilaterally optimal tari ' =trade elasticity Trade elasticity of 5 implies optimal tari s of 0% around the orld It takes import tari s to be as high as 50% to get back to the elfare levels observed under free trade Welfare e ects of large unilateral tari s on other countries minimal 9
10 6 6 5 Rationale for Trade Agreements 5. Are Unilaterally Optimal Tari s Pareto-E cient? Folloing Bagell and Staiger (999), e introduce W c (p c ; p ) V c [p c ; R c (p c ) + T c (p c ; p )] Di erentiating the previous expression e obtain dp dw c = W c c + W p p c c c dt c + W c p c dt The slope of the iso-elfare curves can thus be expressed as = dt (5) =0 W dp dw p dt + dt W dp + p dt dt = dw =0 Wp Proposition If countries are large, unilateral tari s are not Paretoe cient. Proof:. By de nition, unilateral (Nash) tari s satisfy dp Wp c c dt c + W c = @t = 0, + (5) and (6) ) dt dt dt = + = 0 = dt dw dw =0 3. Proposition directly derives from and the fact that Pareto-e ciency dt requires = dt dt dw dt =0 Graphical analysis (Johnson ) dw =0 0
11 N corresponds to the unilateral (Nash) tari s E-E corresponds to the contract curve If countries are too asymmetric, free trade may not be on contract curve 5. What is the Source of the Ine ciency? The only source of the ine ciency is the terms-of-trade externality Formally, suppose that governments ere to set their tari s ignoring their ability to a ect orld prices: W p = W p = 0 Then Equations (5) and (6) immediately dt = = dt dt Intuition: dw =0 In this case, both countries act like small open economies As a result, t = t = 0, hich is e cient from a orld standpoint Question for next lecture: Ho much does this rely on the fact that governments maximize elfare?
12 MIT OpenCourseWare International Economics I Spring 03 For information about citing these materials or our Terms of Use, visit:
International Trade Lecture 23: Trade Policy Theory (I)
14.581 International Trade Lecture 23: Trade Policy Theory (I) 14.581 Week 13 Spring 2013 14.581 (Week 13) Trade Policy Theory (I) Spring 2013 1 / 29 Trade Policy Literature A Brief Overview Key questions:
More informationECONOMICS OF THE GATT/WTO
ECONOMICS OF THE GATT/WTO So if our theories really held say, there ould be no need for trade treaties: global free trade ould emerge spontaneously from the unrestricted pursuit of national interest (Krugman,
More informationInternational Trade Lecture 14: Firm Heterogeneity Theory (I) Melitz (2003)
14.581 International Trade Lecture 14: Firm Heterogeneity Theory (I) Melitz (2003) 14.581 Week 8 Spring 2013 14.581 (Week 8) Melitz (2003) Spring 2013 1 / 42 Firm-Level Heterogeneity and Trade What s wrong
More informationEconS Micro Theory I 1 Recitation #7 - Competitive Markets
EconS 50 - Micro Theory I Recitation #7 - Competitive Markets Exercise. Exercise.5, NS: Suppose that the demand for stilts is given by Q = ; 500 50P and that the long-run total operating costs of each
More informationProduct Di erentiation. We have seen earlier how pure external IRS can lead to intra-industry trade.
Product Di erentiation Introduction We have seen earlier how pure external IRS can lead to intra-industry trade. Now we see how product di erentiation can provide a basis for trade due to consumers valuing
More informationModels of Wage-setting.. January 15, 2010
Models of Wage-setting.. Huw Dixon 200 Cardi January 5, 200 Models of Wage-setting. Importance of Unions in wage-bargaining: more important in EU than US. Several Models. In a unionised labour market,
More informationMicro to Macro: Optimal Trade Policy with Firm Heterogeneity
Micro to Macro: Optimal Trade Policy with Firm Heterogeneity Arnaud Costinot, Andrés Rodríguez-Clare, Ivan Werning MIT, UC Berkeley, MIT March 29th, 2017 Optimal Policy in New Trade Models March 29th,
More informationAdvanced Microeconomics
Advanced Microeconomics Pareto optimality in microeconomics Harald Wiese University of Leipzig Harald Wiese (University of Leipzig) Advanced Microeconomics 1 / 33 Part D. Bargaining theory and Pareto optimality
More informationA New Trade Theory of GATT/WTO Negotiations
A New Trade Theory of GATT/WTO Negotiations Ralph Ossa y Princeton University (IES & NCGG) September 0, 007 (PRELIMINARY AND INCOMPLETE) Abstract In this paper, I develop a novel theory of GATT/WTO negotiations.
More informationInternational Trade
14.581 International Trade Class notes on 2/11/2013 1 1 Taxonomy of eoclassical Trade Models In a neoclassical trade model, comparative advantage, i.e. di erences in relative autarky prices, is the rationale
More informationTrade Agreements as Endogenously Incomplete Contracts
Trade Agreements as Endogenously Incomplete Contracts Henrik Horn (Research Institute of Industrial Economics, Stockholm) Giovanni Maggi (Princeton University) Robert W. Staiger (Stanford University and
More informationCapital Controls as Macro-prudential Policy in a Large Open Economy
Capital Controls as Macro-prudential Policy in a Large Open Economy J. Scott Davis and Michael B. Devereux Globalization Institute Working Paper 358 Research Department https://doi.org/0.2449/gp358 Working
More informationEC202. Microeconomic Principles II. Summer 2009 examination. 2008/2009 syllabus
Summer 2009 examination EC202 Microeconomic Principles II 2008/2009 syllabus Instructions to candidates Time allowed: 3 hours. This paper contains nine questions in three sections. Answer question one
More information5. COMPETITIVE MARKETS
5. COMPETITIVE MARKETS We studied how individual consumers and rms behave in Part I of the book. In Part II of the book, we studied how individual economic agents make decisions when there are strategic
More informationEcon 8401-T.Holmes. Lecture on Foreign Direct Investment. FDI is massive. As noted in Ramondo and Rodriquez-Clare, worldwide sales of multinationals
Econ 8401-T.Holmes Lecture on Foreign Direct Investment FDI is massive. As noted in Ramondo and Rodriquez-Clare, worldwide sales of multinationals is on the order of twice that of total world exports.
More informationThe E ciency Comparison of Taxes under Monopolistic Competition with Heterogenous Firms and Variable Markups
The E ciency Comparison of Taxes under Monopolistic Competition with Heterogenous Firms and Variable Markups November 9, 23 Abstract This paper compares the e ciency implications of aggregate output equivalent
More informationThe GATT/WTO as an Incomplete Contract
The GATT/WTO as an Incomplete Contract Henrik Horn (IIES, Stockholm University) Giovanni Maggi (Princeton University and NBER) Robert W. Staiger (University of Wisconsin and NBER) April 2006 (preliminary
More informationCost Minimization and Cost Curves. Beattie, Taylor, and Watts Sections: 3.1a, 3.2a-b, 4.1
Cost Minimization and Cost Curves Beattie, Talor, and Watts Sections: 3.a, 3.a-b, 4. Agenda The Cost Function and General Cost Minimization Cost Minimization ith One Variable Input Deriving the Average
More informationP C. w a US PT. > 1 a US LC a US. a US
And let s see hat happens to their real ages ith free trade: Autarky ree Trade P T = 1 LT P T = 1 PT > 1 LT = 1 = 1 rom the table above, it is clear that the purchasing poer of ages of American orkers
More informationTari s, Taxes and Foreign Direct Investment
Tari s, Taxes and Foreign Direct Investment Koo Woong Park 1 BK1 PostDoc School of Economics Seoul National University E-mail: kwpark@snu.ac.kr Version: 4 November 00 [ABSTRACT] We study tax (and tari
More information14.54 International Trade Lecture 20: Trade Policy (I)
14.54 International Trade Lecture 20: Trade Policy (I) Tariffs 14.54 Week 13 Fall 2016 14.54 (Week 13) Tariffs Fall 2016 1 / 18 Today s Plan 1 2 Tariffs, Import Demand, and Export Supply Welfare Consequences
More informationECON 4415: International Economics. Autumn Karen Helene Ulltveit-Moe. Lecture 8: TRADE AND OLIGOPOLY
ECON 4415: International Economics Autumn 2006 Karen Helene Ulltveit-Moe Lecture 8: TRADE AND OLIGOPOLY 1 Imperfect competition, and reciprocal dumping "The segmented market perception": each firm perceives
More informationChapter 17: Vertical and Conglomerate Mergers
Chapter 17: Vertical and Conglomerate Mergers Learning Objectives: Students should learn to: 1. Apply the complementary goods model to the analysis of vertical mergers.. Demonstrate the idea of double
More informationMovie Industry: Protection and the Size of the Market. Eduardo C. Andrade
Movie Industry: Protection and the Size of the Market Eduardo C. Andrade Insper Working Paper WPE: 036/2002 Copyright Insper. Todos os direitos reservados. É proibida a reprodução parcial ou integral do
More information2 Maximizing pro ts when marginal costs are increasing
BEE14 { Basic Mathematics for Economists BEE15 { Introduction to Mathematical Economics Week 1, Lecture 1, Notes: Optimization II 3/12/21 Dieter Balkenborg Department of Economics University of Exeter
More informationClass Notes on Chaney (2008)
Class Notes on Chaney (2008) (With Krugman and Melitz along the Way) Econ 840-T.Holmes Model of Chaney AER (2008) As a first step, let s write down the elements of the Chaney model. asymmetric countries
More informationU(x 1. ; x 2 ) = 4 ln x 1
Econ 30 Intermediate Microeconomics Prof. Marek Weretka Final Exam (Group A) You have h to complete the exam. The nal consists of 6 questions (5+0+0+5+0+0=00). Problem. (Quasilinaer income e ect) Mirabella
More informationLecture 5. Varian, Ch. 8; MWG, Chs. 3.E, 3.G, and 3.H. 1 Summary of Lectures 1, 2, and 3: Production theory and duality
Lecture 5 Varian, Ch. 8; MWG, Chs. 3.E, 3.G, and 3.H Summary of Lectures, 2, and 3: Production theory and duality 2 Summary of Lecture 4: Consumption theory 2. Preference orders 2.2 The utility function
More informationEconomic Growth and Development : Exam. Consider the model by Barro (1990). The production function takes the
form Economic Growth and Development : Exam Consider the model by Barro (990). The production function takes the Y t = AK t ( t L t ) where 0 < < where K t is the aggregate stock of capital, L t the labour
More informationEndogenous Protection: Lobbying
Endogenous Protection: Lobbying Matilde Bombardini UBC January 20, 2011 Bombardini (UBC) Endogenous Protection January 20, 2011 1 / 24 Protection for sale Grossman and Helpman (1994) Protection for Sale
More informationIntroducing nominal rigidities.
Introducing nominal rigidities. Olivier Blanchard May 22 14.452. Spring 22. Topic 7. 14.452. Spring, 22 2 In the model we just saw, the price level (the price of goods in terms of money) behaved like an
More informationGAINS FROM TRADE IN NEW TRADE MODELS
GAINS FROM TRADE IN NEW TRADE MODELS Bielefeld University phemelo.tamasiga@uni-bielefeld.de 01-July-2013 Agenda 1 Motivation 2 3 4 5 6 Motivation Samuelson (1939);there are gains from trade, consequently
More informationProblem Set # Public Economics
Problem Set #5 14.41 Public Economics DUE: Dec 3, 2010 1 Tax Distortions This question establishes some basic mathematical ways for thinking about taxation and its relationship to the marginal rate of
More informationSanna-Randaccio LECTURE 22 : NON TARIFF BARRIERS
Sanna-Randaccio LECTURE : NON TARIFF BARRIERS IMPORT QUOTA DEF Partial euilibrium effects Import uota versus tariff (perfect competition) Import uota versus tariff (monopoly) Tariffication in the Uruguay
More informationMidterm Exam 2. Tuesday, November 1. 1 hour and 15 minutes
San Francisco State University Michael Bar ECON 302 Fall 206 Midterm Exam 2 Tuesday, November hour and 5 minutes Name: Instructions. This is closed book, closed notes exam. 2. No calculators of any kind
More informationTrade Agreements and the Nature of Price Determination
Trade Agreements and the Nature of Price Determination By POL ANTRÀS AND ROBERT W. STAIGER The terms-of-trade theory of trade agreements holds that governments are attracted to trade agreements as a means
More informationOverview Basic analysis Strategic trade policy Further topics. Overview
Robert Stehrer Version: June 19, 2013 Overview Tariffs Specific tariffs Ad valorem tariffs Non-tariff barriers Import quotas (Voluntary) Export restraints Local content requirements Subsidies Other Export
More informationTrade Theory with Numbers: Quantifying the Welfare Consequences of Globalization
Trade Theory with Numbers: Quantifying the Welfare Consequences of Globalization Andrés Rodríguez-Clare (UC Berkeley and NBER) September 29, 2012 The Armington Model The Armington Model CES preferences:
More informationMIT PhD International Trade Lecture 19: Trade and Labor Markets (Theory)
14.581 MIT PhD International Trade Lecture 19: Trade and Labor Markets (Theory) Dave Donaldson Spring 2011 Today s Plan 1 2 3 4 5 Overview: Use of asignment models to study Trade and Labor Markets. Review
More informationMacroeconomics IV Problem Set 3 Solutions
4.454 - Macroeconomics IV Problem Set 3 Solutions Juan Pablo Xandri 05/09/0 Question - Jacklin s Critique to Diamond- Dygvig Take the Diamond-Dygvig model in the recitation notes, and consider Jacklin
More informationIt Takes a Village - Network Effect of Child-rearing
It Takes a Village - Netork Effect of Child-rearing Morihiro Yomogida Graduate School of Economics Hitotsubashi University Reiko Aoki Institute of Economic Research Hitotsubashi University May 2005 Abstract
More informationTRADE INTERMEDIARIES AND THE TARIFF PASS-THROUGH
TRADE INTERMEDIARIES AND THE TARIFF PASS-THROUGH Lelio Iapadre (Associate professor of international economics, University of L Aquila, and Professorial lecturer in international economics, Johns Hopkins
More informationEcon 101A Midterm 2 Th 6 November 2003.
Econ 101A Midterm 2 Th 6 November 2003. You have approximately 1 hour and 20 minutes to anser the questions in the midterm. I ill collect the exams at 12.30 sharp. Sho your k, and good luck! Problem 1.
More informationA Political-Economy Theory of Trade Agreements
A Political-Economy Theory of Trade Agreements Giovanni Maggi Princeton University and NBER Andrés Rodríguez-Clare Pennsylvania State University and NBER October 2005 Abstract We develop a model where
More informationTrade on Markets. Both consumers' initial endowments are represented bythesamepointintheedgeworthbox,since
Trade on Markets A market economy entails ownership of resources. The initial endowment of consumer 1 is denoted by (x 1 ;y 1 ), and the initial endowment of consumer 2 is denoted by (x 2 ;y 2 ). Both
More informationEcon 101A Final Exam We May 9, 2012.
Econ 101A Final Exam We May 9, 2012. You have 3 hours to answer the questions in the final exam. We will collect the exams at 2.30 sharp. Show your work, and good luck! Problem 1. Utility Maximization.
More informationA New Trade Theory of GATT/WTO Negotiations
A New Trade Theory of GATT/WTO Negotiations Ralph Ossa y University of Chicago August 26, 200 Abstract I develop and quantify a novel theory of GATT/WTO negotiations. This theory provides new answers to
More informationEconS Micro Theory I 1 Recitation #9 - Monopoly
EconS 50 - Micro Theory I Recitation #9 - Monopoly Exercise A monopolist faces a market demand curve given by: Q = 70 p. (a) If the monopolist can produce at constant average and marginal costs of AC =
More informationInnovation, Firm Dynamics, and International Trade
Innovation, Firm Dynamics, and International Trade Andrew Atkeson, UCLA and Minneapolis Fed Ariel Burstein, UCLA November 10, 2009 tkeson and Burstein ()Innovation, dynamics, international trade November
More informationInternational Economics Lecture 2: The Ricardian Model
International Economics Lecture 2: The Ricardian Model Min Hua & Yiqing Xie School of Economics Fudan University Mar. 5, 2014 Min Hua & Yiqing Xie (Fudan University) Int l Econ - Ricardian Mar. 5, 2014
More informationEndogenous Markups in the New Keynesian Model: Implications for In ation-output Trade-O and Optimal Policy
Endogenous Markups in the New Keynesian Model: Implications for In ation-output Trade-O and Optimal Policy Ozan Eksi TOBB University of Economics and Technology November 2 Abstract The standard new Keynesian
More informationGains from Trade and Comparative Advantage
Gains from Trade and Comparative Advantage 1 Introduction Central questions: What determines the pattern of trade? Who trades what with whom and at what prices? The pattern of trade is based on comparative
More informationOptimal Trade Policy and Production Location
ERIA-DP-016-5 ERIA Discussion Paper Series Optimal Trade Policy and Production Location Ayako OBASHI * Toyo University September 016 Abstract: This paper studies the role of trade policies in a theoretical
More informationECON 442: Quantitative Trade Models. Jack Rossbach
ECON 442: Quantitative Trade Models Jack Rossbach Instruments of Trade Policy Many instruments available to affect international trade flows and prices. Non-exhaustive list: Tariffs: Taxes on Imports.
More informationEconomics II - Exercise Session, December 3, Suggested Solution
Economics II - Exercise Session, December 3, 008 - Suggested Solution Problem 1: A firm is on a competitive market, i.e. takes price of the output as given. Production function is given b f(x 1, x ) =
More informationHeckscher Ohlin Model
Heckscher Ohlin Model Hisahiro Naito College of International Studies University of Tsukuba Hisahiro Naito (Institute) Heckscher Ohlin Model 1 / 46 Motivation In the Ricardian model, only the technological
More information1. If the consumer has income y then the budget constraint is. x + F (q) y. where is a variable taking the values 0 or 1, representing the cases not
Chapter 11 Information Exercise 11.1 A rm sells a single good to a group of customers. Each customer either buys zero or exactly one unit of the good; the good cannot be divided or resold. However, it
More informationTransaction Costs, Asymmetric Countries and Flexible Trade Agreements
Transaction Costs, Asymmetric Countries and Flexible Trade Agreements Mostafa Beshkar (University of New Hampshire) Eric Bond (Vanderbilt University) July 17, 2010 Prepared for the SITE Conference, July
More informationUniversité Paris I Panthéon-Sorbonne Cours de Commerce International L3 Exercise booklet
Université Paris I Panthéon-Sorbonne Cours de Commerce International L3 Exercise booklet Course by Lionel Fontagné and Maria Bas Academic year 2017-2018 1 Differences Exercise 1.1 1. According to the traditional
More informationIntroducing nominal rigidities. A static model.
Introducing nominal rigidities. A static model. Olivier Blanchard May 25 14.452. Spring 25. Topic 7. 1 Why introduce nominal rigidities, and what do they imply? An informal walk-through. In the model we
More informationLecture Notes 1
4.45 Lecture Notes Guido Lorenzoni Fall 2009 A portfolio problem To set the stage, consider a simple nite horizon problem. A risk averse agent can invest in two assets: riskless asset (bond) pays gross
More informationVoting over Selfishly Optimal Income Tax Schedules with Tax-Driven Migrations
Voting over Selfishly Optimal Income Tax Schedules ith Tax-Driven Migrations Darong Dai Department of Economics Texas A&M University Darong Dai (TAMU) Voting over Income Taxes 11/28/2017 1 / 27 Outline
More informationIntermediate Micro HW 2
Intermediate Micro HW June 3, 06 Leontief & Substitution An individual has Leontief preferences over goods x and x He starts ith income y and the to goods have respective prices p and p The price of good
More informationDerivations: LR and SR Profit Maximization
Derivations: LR and SR rofit Maximization Econ 50 - Lecture 5 February 5, 06 Consider the production function f(l, K) = L 4 K 4 This firm can purchase labor and capital at prices and r per unit; it can
More informationAnswers to Microeconomics Prelim of August 24, In practice, firms often price their products by marking up a fixed percentage over (average)
Answers to Microeconomics Prelim of August 24, 2016 1. In practice, firms often price their products by marking up a fixed percentage over (average) cost. To investigate the consequences of markup pricing,
More informationInternational Trade Lecture 5: Increasing Returns to Scale and Monopolistic Competition
International Trade Lecture 5: Increasing Returns to Scale and Monopolistic Competition Yiqing Xie School of Economics Fudan University Nov. 22, 2013 Yiqing Xie (Fudan University) Int l Trade - IRTS-MC
More informationA Theory of Capital Controls as Dynamic Terms-of-Trade Manipulation
A Theory of Capital Controls as Dynamic Terms-of-Trade Manipulation Arnaud Costinot MIT Guido Lorenzoni MIT June 01 Iván Werning MIT Abstract We develop a theory of capital controls as dynamic terms-of-trade
More informationThese notes essentially correspond to chapter 13 of the text.
These notes essentially correspond to chapter 13 of the text. 1 Oligopoly The key feature of the oligopoly (and to some extent, the monopolistically competitive market) market structure is that one rm
More informationE cient Minimum Wages
preliminary, please do not quote. E cient Minimum Wages Sang-Moon Hahm October 4, 204 Abstract Should the government raise minimum wages? Further, should the government consider imposing maximum wages?
More informationLecture08Spring09 Page 1
ecture08pring09 Page 1 Internal Evaluation - - - - - - - - Comments: ecturing tyle All in all you are very good, but if you could rite more of the explanations in ords hen you only say it e don't alays
More informationProblem Set (1 p) (1) 1 (100)
University of British Columbia Department of Economics, Macroeconomics (Econ 0) Prof. Amartya Lahiri Problem Set Risk Aversion Suppose your preferences are given by u(c) = c ; > 0 Suppose you face the
More informationPhD Topics in Macroeconomics
PhD Topics in Macroeconomics Lecture 16: heterogeneous firms and trade, part four Chris Edmond 2nd Semester 214 1 This lecture Trade frictions in Ricardian models with heterogeneous firms 1- Dornbusch,
More informationMicroeconomics, IB and IBP
Microeconomics, IB and IBP ORDINARY EXAM, December 007 Open book, 4 hours Question 1 Suppose the supply of low-skilled labour is given by w = LS 10 where L S is the quantity of low-skilled labour (in million
More informationEcon Review Set 3 - Answers
Econ 4808 Review Set 3 - Answers Outline: 1. Limits, continuity & derivatives. 2. Economic applications of derivatives. Unconstrained optimization. Elasticities. 2.1 Revenue and pro t functions 2.2 Productions
More informationEconomics 230a, Fall 2014 Lecture Note 7: Externalities, the Marginal Cost of Public Funds, and Imperfect Competition
Economics 230a, Fall 2014 Lecture Note 7: Externalities, the Marginal Cost of Public Funds, and Imperfect Competition We have seen that some approaches to dealing with externalities (for example, taxes
More informationDiscussion Papers in Economics. No. 12/03. Nonlinear Income Tax Reforms. Alan Krause
Discussion Papers in Economics No. 1/0 Nonlinear Income Tax Reforms By Alan Krause Department of Economics and Related Studies University of York Heslington York, YO10 5DD Nonlinear Income Tax Reforms
More informationMidterm 2 (Group A) U (x 1 ;x 2 )=3lnx 1 +3 ln x 2
Econ 301 Midterm 2 (Group A) You have 70 minutes to complete the exam. The midterm consists of 4 questions (25,30,25 and 20 points). Problem 1 (25p). (Uncertainty and insurance) You are an owner of a luxurious
More informationI. Labour Supply. 1. Neo-classical Labour Supply. 1. Basic Trends and Stylized Facts
I. Labour Supply 1. Neo-classical Labour Supply 1. Basic Trends and Stylized Facts 2. Static Model a. Decision of hether to ork or not: Extensive Margin b. Decision of ho many hours to ork: Intensive margin
More informationOptimal tax and transfer policy
Optimal tax and transfer policy (non-linear income taxes and redistribution) March 2, 2016 Non-linear taxation I So far we have considered linear taxes on consumption, labour income and capital income
More informationInternational Trade: Lecture 4
International Trade: Lecture 4 Alexander Tarasov Higher School of Economics Fall 2016 Alexander Tarasov (Higher School of Economics) International Trade (Lecture 4) Fall 2016 1 / 34 Motivation Chapter
More information1 Unemployment Insurance
1 Unemployment Insurance 1.1 Introduction Unemployment Insurance (UI) is a federal program that is adminstered by the states in which taxes are used to pay for bene ts to workers laid o by rms. UI started
More informationTopic 6: Optimal Monetary Policy and International Policy Coordination
Topic 6: Optimal Monetary Policy and International Policy Coordination - Now that we understand how to construct a utility-based intertemporal open macro model, we can use it to study the welfare implications
More informationProblem Set # Public Economics
Problem Set #3 14.41 Public Economics DUE: October 29, 2010 1 Social Security DIscuss the validity of the following claims about Social Security. Determine whether each claim is True or False and present
More informationUCLA Department of Economics Ph. D. Preliminary Exam Micro-Economic Theory
UCLA Department of Economics Ph. D. Preliminary Exam Micro-Economic Theory (SPRING 2016) Instructions: You have 4 hours for the exam Answer any 5 out of the 6 questions. All questions are weighted equally.
More information1 Two Period Production Economy
University of British Columbia Department of Economics, Macroeconomics (Econ 502) Prof. Amartya Lahiri Handout # 3 1 Two Period Production Economy We shall now extend our two-period exchange economy model
More informationLobby Interaction and Trade Policy
The University of Adelaide School of Economics Research Paper No. 2010-04 May 2010 Lobby Interaction and Trade Policy Tatyana Chesnokova Lobby Interaction and Trade Policy Tatyana Chesnokova y University
More informationOptimal Redistribution in an Open Economy
Optimal Redistribution in an Open Economy Oleg Itskhoki Harvard University Princeton University January 8, 2008 1 / 29 How should society respond to increasing inequality? 2 / 29 How should society respond
More information14.02 Principles of Macroeconomics Solutions to Problem Set # 2
4.02 Principles of Macroeconomics Solutions to Problem Set # 2 September 25, 2009 True/False/Uncertain [20 points] Please state whether each of the following claims are True, False or Uncertain, and provide
More informationFinal. You have 2h to complete the exam and the nal consists of 6 questions ( =100).
Econ 3 Intermediate Microeconomics Prof. Marek Weretka Final You have h to complete the exam and the nal consists of questions (+++++=). Problem. Ace consumes bananas x and kiwis x. The prices of both
More informationMathematical Economics dr Wioletta Nowak. Lecture 1
Mathematical Economics dr Wioletta Nowak Lecture 1 Syllabus Mathematical Theory of Demand Utility Maximization Problem Expenditure Minimization Problem Mathematical Theory of Production Profit Maximization
More informationThe Heckscher-Ohlin Model: Features, Flaws, and Fixes. I: What's the H-O Model Like? Alan V. Deardorff University of Michigan
The Heckscher-Ohlin Model: Features Flas and Fixes : What's the H-O Model ike? Alan V. Deardorff University of Michigan Themes of the 3 ectures The HO Model is largely ell behaved in 2 dimensions even
More informationTopic 7. Nominal rigidities
14.452. Topic 7. Nominal rigidities Olivier Blanchard April 2007 Nr. 1 1. Motivation, and organization Why introduce nominal rigidities, and what do they imply? In monetary models, the price level (the
More informationESSAYS ON TRADE LIBERALIZATION WITH FIRM HETEROGENEITY. Aleksandr Vashchilko. Dissertation. Submitted to the faculty of the
ESSAYS ON TRADE LIBERALIZATION WITH FIRM HETEROGENEITY By Aleksandr Vashchilko Dissertation Submitted to the faculty of the Graduate School of Vanderbilt University in partial ful llment of the requirements
More informationMIT PhD International Trade Lecture 5: The Ricardo-Viner and Heckscher-Ohlin Models (Theory I)
14.581 MIT PhD International Trade Lecture 5: The Ricardo-Viner and Heckscher-Ohlin Models (Theory I) Dave Donaldson Spring 2011 Today s Plan 1 Introduction to Factor Proportions Theory 2 The Ricardo-Viner
More informationCEMMAP Masterclass: Empirical Models of Comparative Advantage and the Gains from Trade 1 Lecture 1: Ricardian Models (I)
CEMMAP Masterclass: Empirical Models of Comparative Advantage and the Gains from Trade 1 Lecture 1: Ricardian Models (I) Dave Donaldson (MIT) CEMMAP MC July 2018 1 All material based on earlier courses
More informationGradual Tariff Adjustment with Imperfect Capital Mobility between Countries
Gradual Tariff Adjustment with Imperfect Capital Mobility between Countries HanSung Kim * 1) Korea Institute for International Economic Policy Ki-Dong Lee ** 2) Department of International Commerce, Keimyung
More informationEquilibrium Asset Returns
Equilibrium Asset Returns Equilibrium Asset Returns 1/ 38 Introduction We analyze the Intertemporal Capital Asset Pricing Model (ICAPM) of Robert Merton (1973). The standard single-period CAPM holds when
More informationNinth ARTNeT Capacity Building Workshop for Trade Research "Trade Flows and Trade Policy Analysis"
Ninth ARTNeT Capacity Building Workshop for Trade Research "Trade Flows and Trade Policy Analysis" June 2013 Bangkok, Thailand Cosimo Beverelli and Rainer Lanz (World Trade Organization) 1 Partial-equilibrium
More informationECON Micro Foundations
ECON 302 - Micro Foundations Michael Bar September 13, 2016 Contents 1 Consumer s Choice 2 1.1 Preferences.................................... 2 1.2 Budget Constraint................................ 3
More informationPartial privatization as a source of trade gains
Partial privatization as a source of trade gains Kenji Fujiwara School of Economics, Kwansei Gakuin University April 12, 2008 Abstract A model of mixed oligopoly is constructed in which a Home public firm
More information