This course examines theories of international trade in goods and services and analyzes the consequences of trade policies. The course presents the principle of comparative advantage and its application to classical and modern trade theory. Focusing on the long-term effects of international economic integration, the course discusses the economic effects of trade, as well as trade barriers and trading blocks, on industrial competitiveness, the income distribution, growth and welfare.
Part I of the class is dedicated to classic trade theory in a general equilibrium setting under perfect competition and explains trade among different countries. Part II of the class presents recent advances in trade theory under imperfect competition and with heterogeneous firms; it explains trade among similar countries and the formation of multinational enterprises. Part III applies the insights from both partial and general equilibrium models to policy issues related to international economic integration.