MA (Economics) 2018 – 20 Empirical Issues in Trade Semester III Course Outline Introduction
This course is designed towards understanding how theories in international trade can be meaningfully estimated using economic data. There are two aspects to empirically testing economic theories:
First, is to understand how empirically testable hypotheses can be derived from an existing theory and Second, the use of trade analytical tools on actual trade data to understand implication of various trade scenarios vis-à-vis trade theories
For teaching purposes this course will be divided into two parts (A& B): Empirical issues related to trade theories and application of trade analytical tools to gauge the real life trade scenarios with respect to policy stance ( ex-ante and ex-post).
Pedagogy
Class Room teaching
Use of Trade database and analytical tools Hands on exercises and demonstration
Evaluation
Mid Term Test ( 30 Marks)
Group Project ( 30 Marks) End Term Test ( 40 Marks)
Outline
Part A Session No Topic Text/References 1-5 1. Trade at the sectoral level: Feenstra Ch 2 and 3 + Handout a) The Heckscher – Ohlin – Vanek (HOV) model b) Partial tests of HOV model c) Complete test of HOV Theorem d) How to use data on different technologies the HOV theorem e) Estimating the GDP function f) Wage inequality and trade 6-10 2. Trade at the Firm Level a) Measurements of Intra Industry Trade b) Distinguishing vertical versus horizontal intra industry trade c) Determinants of horizontal and vertical intra industry trade d) Empirical applications of the Melitz model 11-15 3. Gravity Model of Trade Feenstra chapter 5 + handout a) Derivation of the Gravity Equation from Ricardian and Heckscher Ohlin models of trade b) Using the gravity equation to determine trade potential among countries c) Using the gravity equation to determine trade creation and trade diversion of Free Trade Agreements d) Other empirical applications of the gravity equation: Home market effect, border effect
Part B Session Topic Text/Reference / Cases
1-3 Product Space Analytics Chap 1-3 (NC), Chap 1 (MG),
a) Basics of Trade Data base Chap 1 (WTO) b) Trade Outcome Analysis Trade Map, WITS online Revealed Comparative Advantage resources, WITS and Trade index Map Manuals, Classroom Trade Complementarity index Export Similarity Index exercises Trade Intensity Index Export Specialization Index Export Diversification (or Concentration) Index 5-7 Determining Competitiveness Chap 4-6 (NC), Chap 1 (RF), a) Extensive and Intensive Margin Chap 1 (WTO), Classroom b) Unit Price and Market Share analysis exercises c) Constant Market Share (CMS) Analysis d) Shift-Share Analysis e) Export Potential and Product Diversification index 8-10 Intra-Industry Trade, Production Network Value Chap 16 (NC), WITS User Chain Manual, Version 2.01, a) GLIndex and Sectoral GLI b) Horizontal and LQ and HQ Vertical IIT Classroom exercises c) Calculating Value addition and importance of International I-O table (MRIO database) d) TiVA and EORA database e) Participation and Position Index f) Forward and Backward Participation 11-13 Understanding Trade Potential and Policy Chap 13-15, 17 (NC), BT, Implication Classroom exercises a) Estimating the Gravity Model b) Finding trade creation and trade diversion in the Gravity model c) Estimating Trade Costs d) Modeling Nob-Tariff Barriers 14-15 Partial Equlibrium through Simulation Chap 13-15, 17 (NC), BT, a) Economics of partial equilibrium in trade Chap 4 (WTO), JO literature b) Concepts of various elasticity and Armington Classroom exercises Assumption c) Implication of Price Effect d) Tariff liberalisation and estimation through SMART model
Text and References
Feenstra • (NC) Biswajit Nag and Debashis Chakraborty (eds.) (2019), “India’s Trade Analytics: Patterns and Opportunities”, Sage. (WTO) World Trade Organization, “A Practical Guide to Trade Data Analysis”, WTO. (MG) Mikic, Mia and John Gilbert (2009), “Trade Statistics in Policymaking - A Handbook of Commonly Used Trade Indices and Indicators”, Economic and Social Commission for Asia and the Pacific. (RF) Reis, José Guilherme and Thomas Farole (2012), ‘Trade Competitiveness Diagnostic Toolkit’, World Bank. (PT) Piermartini, Roberta and Robert Teh (2005), “Demystifying Modeling Methods for Trade Policy”, Discussion Paper 10, WTO. (JO) Jammes, Olivier and Marcelo Olarreaga (2005), “Explaining SMART and GSIM”, The World Bank (MP) Michael Plummer, et. al ( 2010): Methodology for Impact Analysis of Free Trade Agreements ( Asian Development Bank) (BT) Luca De Benedictis and Daria Taglioni, ‘The Gravity Model in International Trade’, in Luca De Benedictis and Daria Taglioni (Eds.), ‘The Trade Impact of European Union Preferential Policies: An Analysis Through Gravity Models’, Springer, pp. 55-89.
