Dr Benedikt Heid
Location: Room 4.08, 10 Pulteney Street
Telephone: 831 34930
Office hours for students: 1-2 pm Fridays
email: benedikt.heid@adelaide.edu.au

Research in international trade focusses on the determinants and consequences of globalization: Do consumers and workers benefit from trade liberalization? Why do countries sign trade agreements and how do they affect trade flows? How do firms react to increasing competition? What is the optimal level of tariffs? Which firms lose from globalization, and which ones profit from it? Why do multinational enterprises exist? 

This course seeks to improve our understanding of the economic effects of globalization and give answer to these questions.

The course will focus both on current theoretical and empirical research in international trade with a clear general equilibrium (economy wide) focus. This approach is also helpful in other fields of economics including public finance, environmental and resource economics, agricultural or other industry/sector economics, and the economics of politics.

After completing this course, students will be able to analyze current issues in international trade with analytical rigor. This is essential for both trade policy consulting for governments and the private sector as well as for understanding current research papers in international trade as a preparation for a PhD.

The course assumes students have the basic toolkit of microeconomics and trade theory from undergraduate courses, which will be built on and applied to analyse contemporary trade and trade-related policy issues.

On successful completion of this course, students will be able to:

1. Describe the most important theories used in the academic literature to explain observed trade patterns using formal mathematical analysis.
2. Sketch the interaction between different stylized facts of international trade patterns and the development of theories which try to explain these stylized facts.
3. Apply trade theories to describe the effects of trade liberalization policies and to critically evaluate current trade policy discussions.
4. Identify and reflect upon the individual contributions of important research papers in international trade and constructively criticize their shortcomings.
5. Have improved their communication skills through presenting their work and by interacting during tutorial sessions and discussions in class.
6. Describe the most commonly used econometric techniques in current international trade research.

The course will be mostly based on the following text book:

Robert C. Feenstra (2016): Advanced International Trade. Theory and Evidence. Second Edition. Princeton University Press.

In addition, papers published in academic journals related to the material covered in class will be linked to on myuni.

Alternative graduate-level textbooks are:

• Dixit, A.K. and Norman, V. (1980): Theory of International Trade. Cambridge Economic Handbooks.
• Krugman, Paul R. and Helpman, Elhanan (1985): Market Structure and Foreign Trade Increasing Returns, Imperfect Competition, and the International Economy. MIT Press.

Note that these textbooks do not cover the more recent developments which we will discuss in class but are perfectly fine for the old classics.


To recapitulate the most important concepts in international trade at an undergraduate level, students are advised to consult any of the following books:

• Feenstra, Robert C. and Taylor, Alan M. (2014): International Economics. Third Edition. Worth Macmillan.
• Krugman, Paul R., Obstfeld, Maurice and Melitz, Marc J. (2015): International Economics. Theory and Policy. Tenth Edition. Pearson.
• McLaren, John (2013): International Trade. Wiley.

A good intermediate trade textbook (more formal than the above but less formal than Feenstra (2016) is:

• Marrewijk, Charles van (2012): International Economics. Theory, Application, and Policy. Second Edition. Oxford University Press.

Finally, a very nice short and non-mathematical summary of international trade for a general interest audience is:

• Helpman, Elhanan (2011): Understanding Global Trade. Belknap Harvard.

If you want to refresh your microeconomics knowledge, I recommend these books:

• Varian, Hal R. (2006): Intermediate Microeconomics. Seventh Edition. Norton.
• Varian, Hal R. (1992): Microeconomic Analysis. Third Edition. Norton.

If you want to refresh your math knowledge, I recommend this book:

• Sydsaeter, Knut, Hammond, Peter, Strom, Arne and Carvajal, Andrés (2016): Essential Mathematics for Economic Analysis. Fifth Edition. Pearson.

The slides used in each lecture will be uploaded on MyUni after each lecture. Additional links to papers will also be put on MyUni.

Student participation in lectures is actively encouraged in the form of questions, comments and discussion.

In addition to the two 2-hour classes each week, students are expected to spend an additional 8 hours each week studying the required readings in advance of and then again following each lecture.

Teaching & Learning Activities	Related Learning Outcomes
Lectures	1-4, 6
Tutorials	1-6

tentative time table

week	topic	chapter
1	Trade due to technological differences: Ricardo model	1
2	Trade due to endowment differences: Heckscher-Ohlin-Samuelson model	2
3	Trade between similar countries: Krugman model and monopolistic competition	5
4-5	Estimating trade costs and the effects of trade agreements: the gravity equation	5
6	Technology differences revisited: Eaton-Kortum model, a Ricardian model for the 21st century	6
7	Trade policy I: Import tariffs	8
8	Trade policy II: import quotas as an example of non-tariff barriers	9
9	Heterogeneous firms and within-industry adjustments of trade liberalization	6
10-11	Trade in intermediate inputs and trade in tasks: offshoring	4
12	Multinationals and organization of the firm: exports vs. FDI	12

Note: This table is subject to change at the discretion of the lecturer, depending on the general progress during class as well as student feedback.

Given the small number in this course, every class period will involve student participation in discussion.

Assessment Task	Due Date/ Week	Weight	Length(Word,Time)	Learning Outcomes
Mid-term Exam	Week 6	30%	1 hour	1-4, 6
Assignments	continuous	20%	TBA	1-6
Final Exam	Week TBA	50%	2 hours	1-4, 6
Total		100%

Mid-term Test 30%

A 1 hour mid-term test will be held in class some time around Week 4 to 6. It will cover the materials covered so far in the lecture and tutorials. The exact date and material covered will be announced during the lecture.

There will not be a make-up mid-semster exam. Those who miss the mid-semester exam must obtain documentation in line with university regulations in order to avoid a grade of zero on the mid semester exam. For those who miss the mid-semester exam and obtain accepted documentation the relevant weight will be added to the weight of the final exam in determining the overall grade for the course.


Assignments 20%

There will be 6 assignments over the semester. From every assignment, one exercise will be randomly chosen and graded. The grade for the selected exercise will be 0, 2 or 4, depending on the quality of the answer provided. Particular attention will be given to the work out of the exercise's solutions.

The grading rule to be used is: 0: no attempt to do the assignment, 2: a majority of incorrect or undocumented answers, but some effort shown. 4: a majority of correct and documented answers, considerable effort shown.


Final Exam 50%

There will be a 2 hour exam at the end of the course at a time to be advised. The exam will cover the entire course. This includes all materials from the lectures, assignment textbook, and other readings, as well as discussions and exercises considered in the tutorials. The final exam is worth 50% of the course’s assessment.


General remarks

Legible hand-writing and the quality of English expression are considered to be integral parts of the assessment process. Please note that marks will be deducted in the final examination for poor English expression.

Dictionaries (e.g., Chinese to English) will be allowed in examinations but not electronic ones. Economics dictionaries will not be allowed.


Grade calculation

Final student grades will be determined in the following way:

The final grade will be a weighted average of the grade obtained in the mid-term test (weight 30%), the final exam (weight 50%) and the grade obtained in the assignments (20%).

The grade in the assignments is calculated in the following way: Every assignment obtains 0, 2 or 4 points. The points of the best 5 of the 6 assignments are summed up. Hence, the maximum number of points from the assignments will be 20 equalling a mark of 100 for the calculation of the weighted average. Lower obtained points are scaled accordingly.

The assignment submission information will be reviewed and updated for 2017.

Additional Assessment

If a student receives 45-49 for their final mark for the course they will automatically be granted an additional assessment. This will most likely be in the form of a new exam (Additional Assessment) and will have the same weight as the original exam unless an alternative requirement (for example a hurdle requirement) is stated in this semester’s Course Outline. If, after replacing the original exam mark with the new exam mark, it is calculated that the student has passed the course, they will receive 50 Pass as their final result for the course (no higher) but if the calculation totals less than 50, their grade will be Fail and the higher of the original mark or the mark following the Additional Assessment will be recorded as the final result.