**International Trade Theory**

**Lecture Location**: Rio Hondo: Grupo 002, Salon 303; Grupo 003, Salon B-2**Day/Time**: Monday & Wednesday: Grupo 002, 10:00-11:30am; Grupo 003, 11:30am to 1:00pm**Office Hours**: Monday & Wednesday - 2:30pm to 3:30pm in Santa Teresa, or by appointment**Office Location**: Centro de Investigación (CIE), ITAM, Santa Teresa **E-mail**: rahul.giri@itam.mx

**Syllabus - click here.**

**Textbooks**

Primary Textbook: *International Trade: Theory and Evidence, International ed (1995) *by James R. Markusen, James R. Melvin, William H. Kaempfer and Keith E. Maskus. (you can access the primary textbook from Prof. Markusen's site.** **Download it from here.)

Secondary Textbook:* **International Trade, *by Robert C. Feenstra and Alan M. Taylor, second edition.

**Some Interesting Reading**

**Lecture Notes**

Topic 1: Looking at the Bigger Picture*1.1:* How Important is Trade or Why Should We Care About International Trade? (Chapter 1 from secondary textbook)*1.2:* Gains from Trade (Chapter 4 & 5 (till page page 66) from primary textbook)

Topic 2: Models of Trade with Perfect Competition

2.1: Differences in Technology - The Ricardian Trade Model (Chapter 7 from primary textbook and Chapter 2 from secondary textbook)

- Supplementary material - Closed Economy Solution to the Ricardian Model

2.2: Differences in Endowments - The Heckscher-Ohlin Model (Chapter 8 from primary textbook and Chapter 4 from secondary textbook)

- Supplementary material - Closed Economy Solution to the HO Model*2.3:* Differences in Endowments with Specific Factors - The Specific Factors Model (Chapter 9 from primary textbook)*Topic 3: Models of Trade with Imperfect Competition **3.1:* Imperfect Competition as Determinant of Trade (Chapter 11 from primary textbook)*3.2: *Increasing Returns to Scale as Determinant of Trade (Chapter 12 from primary textbook and Chapter 6 from secondary textbook)*3.3:* Introducing Firm Level Heterogeneity in Krugman's Model of Monopolistic Competition - Melitz (2003)

- Melitz, Marc. 2003. The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica 71: 1695-

1725.*Topic 4: Gravity Equation**4.1: *Gravity Equation

**Homework**

Homework 1 - Gains from Trade and Ricardian Trade Model (Question 5 to be submitted in class)

Solution to Homework 1

Homework 2 - Heckscher-Ohlin and Specific Factors Model (Question 5 to be submitted in class)

- Article to be read for homework question.

Solution to Homework 2

Homework 3 - Imperfect Competition and Trade (Question 3 to be submitted in class)

Data for Homework 3

Solution to Homework 3

Homework 4 - Gravity Equation (Question 1 to be submitted in class)

Data for homework

Solution to Question 1 of Homework 4

Solution to Question 2 of Homework 4