LEAD087 - Business Issues and Economics with a Global Eye

Course Description

Although most trade theories conclude that the net welfare impact of trade is positive, those welfare benefits are not distributed equally, giving rise to somewhat predictable patterns of resistance and support for trade policy. Whereas economics predicts trade patterns on the basis of which country can produce which good most inexpensively, political economics recognizes the constraints to trade arising from these coalitions of resistance and support and their interaction with political decision making.

Course Outline

This mini-course explores the patterns of trade and the resulting welfare distribution, based on six different theories of trade. Models from game theory will be introduced to illustrate the impact of interest groups on both policy-making and bargaining. The challenges of global, multilateral governance of trade (e.g., the World Trade Organization) will also be explored in the context of the recent trend toward bilateral and plurilateral trade agreements.

Topics Covered:

• Theories of trade:

  • Ricardian comparative advantage

  • The heckscher-ohlin model

  • The stolper-samuelson model

  • New trade theory

  • New new trade theory

  • National competitive advantage

• Winners and Losers:

  • Analysing the welfare effects of trade

  • Interest groups and coalitions

• The politics of trade:

  • Game theory, interest groups and policy-making

  • Game theory, bargaining and credible constraints

  • Realism, institutionalism and international institutions of trade