International Trade and Comparative Advantage

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Economics 364: International Trade

Assistant Professor Peter M. Morrow University of Toronto
peter.morrow@utoronto.ca

Economics 364 (International Trade) Fall 2011

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Welcome!
• This class will deal with issues of international trade. • What determines the flow of goods and services across borders? What are the implications of these flows for domestic and foreign economic conditions? • How have the forces that determine these flows changed over time?

Economics 364 (International Trade) Fall 2011

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Administration: Books
• We will use International Economics: Theory and Policy by Paul R. Krugman, Marc J. Melitz, and Maurice Obstfeld. • http : //krugman.blogs.nytimes.com/ (Paul Krugman, Princeton) • http : //economistsview.typepad.com/ (Mark Thoma, University of Oregon) • http : //worthwhile.typepad.com/ (Nick Rowe, Carleton University)

Economics 364 (International Trade) Fall 2011

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Administration: Grading
• Grade Composition – Problem Sets 10% – Midterm Exam: 40% (October 24th) – End of Term Exam: 50% Final exam period (to be announced)

Economics 364 (International Trade) Fall 2011

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Administration: Grading
• Grade Scale – – – – – : : : : : “A": 80 − 100 “B": 70 − 79.9 “C": 60 − 69.9 “D": 50 − 59.9 “F": 0 − 49.9

– This distribution roughly follows the Academic Handbook for instructors that was issued in September 2010. • The exams will “aim" for an median of approximately 70. • At the end of the term, if the median score is less than 70, all scores will be adjusted up so that the median is 70. Economics 364 (International Trade) Fall 2011 5

Administration: Office Hours
• My office hours are 10am-11am Tuesdays and Wednesdays. Appointments outside of normal office hours can be made in extreme circumstances. • My email is peter.morrow@utoronto.ca – Feel free to contact me via email. – I generally check my email several times a day and will respond within 24 hours during the week or 48 hours on the weekend. – However, if your email questions cannot be answered in a couple of sentences or less, there is a strong chance I will ask you to come to my (or the TA’s) office hours. – See the syllabus for more details. Economics 364 (International Trade) Fall 2011 6

Administration: TA and Website
• Your Teaching Assistants are Leandro Freylejer and Michelle Liu. • leandro.freylejer@utoronto.ca and mengxiao.liu@utoronto.ca • I will be using the Blackboard teaching support website. It will contain the supplemental questions, readings, and announcements. • Let’s get to it....

Economics 364 (International Trade) Fall 2011

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Tackling Big Questions
• Developing models to answer questions that involve the actions of billions of workers and trillions of dollars worth of international transactions.

Economics 364 (International Trade) Fall 2011

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Tackling Big Questions
• Developing models to answer questions that involve the actions of billions of workers and trillions of dollars worth of international transactions. • We will obviously abstract from many important details. • Question: Do these omissions change our predictions?

Economics 364 (International Trade) Fall 2011

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Solow (1953)
• “All theory depends on assumptions that are not quite true. That is what makes it theory. The art of successful theorizing is to make the inevitable simplifying assumptions in such a way that the final results are not very sensitive. A ‘crucial’ assumption is one on which the conclusions do depend sensitively, and it is important that critical assumptions be reasonably realistic. When the results of a theory seem to flow specifically from a special crucial assumption, then if the assumption is dubious, the results are suspect."

Economics 364 (International Trade) Fall 2011

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Marshall (quoted in Sills and Merton 1991, p. 151)
• “(1) Use mathematics as a shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into...
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