International Economics I

A Brief Historical Introduction to the Theory and Practices of International Trade  

  1. Distinguishing features of Inter-regional and International Trade

Gains from Trade 

  1. The gains from trade theorem - free trade versus no trade (autarky)

  2. Restricted/subsidized trade versus autarky

  3. Free trade versus restricted trade

  4. Failures of the gains from trade theorem "non-convexities" "non-tangencies"

  5. Distribution of gains between countriesEquilibrium prices relative to autarky prices

  6. Distribution of gains between individuals within countries Identical endowments, different preferences

  7. Identical preferences, different endowments

Bases for Trade 

The No-Trade Model 

  1. Identical production functions in all countries

  2. Same relative factor endowments in all countries

  3. Constant Returns to Scale

  4. Identical and Homogeneous preferences in trading countries

  5. No Distortions (imperfect competition, externalities, taxes). 

Ricardian Model - Technology as a basis for Trade

  1. A one-factor model of technology differences. Comparative versus absolute advantage

  2. Production frontier, closed-economy equilibrium

  3. Comparative advantage and autarky price ratios: Pattern of comparative advantage reflected in autarky prices

  4. Excess demand and international equilibrium

  5. The distribution of gains between countriesBig versus small countries, More productive versus less productive countries

  6. Real wage comparisons across countries - The role of equilibrium prices, The role of absolute advantage

Heckscher-Ohlin Theory

  1. Basic assumptions

  2. The Heckscher-Ohlin Theorem

  3. The Factor-Price-Equalization Theorem

  4. The Stolper-Samuelson Theorem

  5. The Rybczynski Theorem

  6. The Leontief Paradox

Government Policies and Distortions as Determinants of Trade 

  1. Distinguishing among producer, consumer, and world prices.

  2. Autarky equilibrium, where does tax revenue go?

  3. Small economy facing fixed world prices: distortions as a basis for (bad) trade.

  4. Two identical economies, except one has a distortion.

  5. Gains-from-trade analysis: the expansion condition revisited.

  6. Factor market distortions.

Trade Policy: Tariffs 

  1. Tariffs, prices and welfare in a small economy

  2. Equivalence of an import tariff and export tax

  3. Export subsidies

  4. Existing distortions, second best, “infant industry argument

  5. Terms of trade and the optimal tariff

  6. Tariffs and retaliation, trade wars

  7. Effective protection, internal income redistribution 

Quotas and Other Barriers 

  1. Methods of instituting a quota

  2. Types of import quotas, Effects of import quotas

  3. The equivalence of tariffs and quotas

  4. Voluntary Export Restraints

Terms of Trade and Economic Development: The Secular Deterioration Hypothesis 

The Prebisch-Singer Thesis  


Association of South East Asian Nations; North American Free Trade Agreement  


  1. Bo SöderstenGeoffrey Reed: International Economics, (St. Martin's Press, 1994)

  2. MilitiadesChacoliades: Principles of International Economics, (McGraw-Hill Publishing Co., 1981)

  3. Robert C. Feenstra, Advanced International Trade: Theory and Evidence, (Princeton University, 2004).

  4. Caves, Frankel & Jones: World Trade and Payments  An Introduction (Pearson Education, 9th Edition).

  5. Peter B. Kenen: The International Economy, (Cambridge University Press, 4th Edition).