about this course
After introducing the elements of trade theory, this course will examine how the pattern of international
trade affects a country's income distribution. Those effects explain why some people oppose free trade.
Next, this course will examine models in which firms face increasing returns to scale. In those models, the
industry tends to become monopolized because firms can reduce average cost by increasing production.
But international trade can create competition for such monopolies, so this course will also examine how
international trade can increase competition and the product variety available to consumers.
A prediction of all multi-factor trade models is that countries effectively trade factors of production (like
capital or labor) when they trade in goods. If that were the case and if there is free trade in goods, then
there should be no reason for people to migrate and firms to set up factories overseas. In reality however,
people do migrate and firms do set up operations overseas, so this course will also examine immigration
and foreign direct investment.
Finally, this course will examine the policy tools that governments use to restrict trade, the reasons why
they restrict trade and the effects of those policies. In that discussion, this course will examine the reasons
why developing countries failed to improve living standards by protecting their domestic industries from
foreign competition. And this course will examine the reasons why developing countries with an outward
orientation succeeded in improving living standards.