In this series of lectures, we will explore the pattern and consequences of trade. We will start with the simplest approach to trade: trade among perfectly competitive economies under constant returns to scale. We first study, in a general Arrow-Debreu economy, the conditions under which trade follows the ‘Law of Comparative Advantage’ and is Pareto efficient. Then we move on to models that restrict the supply side in different manners (Ricardian, Ricardo-Viner, Heckscher-Ohlin, Assignment) in order to generate sharper predictions about what will happen when economies trade. Finally, we will turn to models in which increasing returns to scale, and/or market power, can generate new motives for trade and new consequences due to the fact that trade can either exacerbate or mitigate existing distortions. In the last part of the course we will synthesize the earlier knowledge and describe how economists use models and data to provide answers to many of the counterfactual questions (for example: what is the impact of a change in trade policies, in trade deficits, or in the size of a foreign trading partner?) that animate contemporary policy discussions. This 15-hour course is going to start on Tuesday Dec. 17 at 2:00pm and ends on Thursday Dec. 19 at 5:00pm.
Prof. Arnaud Costinot (MIT)