International Trade

about this course

After introducing the elements of trade theory, this course will examine how the pattern of international trade affects a country's income distribution. Those effects explain why some people oppose free trade.

Next, this course will examine models in which firms face increasing returns to scale. In those models, the industry tends to become monopolized because firms can reduce average cost by increasing production. But international trade can create competition for such monopolies, so this course will also examine how international trade can increase competition and the product variety available to consumers.

A prediction of all multi-factor trade models is that countries effectively trade factors of production (like capital or labor) when they trade in goods. If that were the case and if there is free trade in goods, then there should be no reason for people to migrate and firms to set up factories overseas. In reality however, people do migrate and firms do set up operations overseas, so this course will also examine immigration and foreign direct investment.

Finally, this course will examine the policy tools that governments use to restrict trade, the reasons why they restrict trade and the effects of those policies. In that discussion, this course will examine the reasons why developing countries failed to improve living standards by protecting their domestic industries from foreign competition. And this course will examine the reasons why developing countries with an outward orientation succeeded in improving living standards.