Tyler Cowen's Blog, page 308
September 1, 2013
Final version of my International Trade class reading list
It is here under the fold, and I will still add some pieces, based on your earlier suggestions, though I have not read through them all yet…
International Trade reading list, Fall 2013
Books: Paul Krugman, Geography and Trade, and Development, Geography, and Economic Theory. Dani Rodrik, One Economics, Many Recipes, and Jacob Viner, Studies in the Theory of International Trade (on-line).
All videos can be found on MRUniversity.com, if not in the international trade section than in the development economics class or a few on Mexico in the Mexico class. In general I recommend viewing the videos before tackling the readings.
I. Comparative advantage and free trade
Bernhofen, Daniel and John C. Brown. 2005. “An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan.” American Economic Review.
Autor, David H. David Dorn and Gordon H. Hanson. 2013. “Untangling Trade and Technology: Evidence from Local Labor Markets.” NBER Working Paper.
Acemoglu, Daron, David Autor, David Dorn, and Gordon H. Hanson. 2013. “Import Competition and the Great US Employment Sag of the 2000s.” NBER Working Paper.
Feenstra, Robert C. 2008. “Offshoring in the Global Economy.” Ohlin Lecture Series.
Grossman, Gene M. and Esteban Rossi-Hansberg. 2006. “The Rise of Offshoring: It’s Not Wine for Cloth Anymore.” Federal Reserve Bank of Kansas City.
Grossman, Gene M. 2008. “Trading Tasks: A Simple Theory of Offshoring.” American Economic Review.
Donaldson, David. 2011. “Trade and Labor Markets.” powerpoint.
Khandelwal, Amit. 2009. “The Long and Short (of) Quality Ladders.” Review of Economic Studies.
Bernard, Andrew B., Stephen J Redding, and Peter K. Schott. 2012. “Testing the Factor Price Equality with Unobserved Differences in Factor Quality or Productivity.” U.S. Census Bureau Working Paper.
Baldwin, Richard. 2011. “How Trade and Industrial Organization After Globalization’s 2nd Unblundling: How Building and Joining a Supply Chain are Different and Why it Matters.” NBER Working Paper.
Goldberg, Pinelopi Koujianou and Nina Pavcnik. 2007. “Distributional Effects of Globalization in Developing Countries.” Journal of Economic Literature.
Videos: The two videos on Comparative Advantage, Sources of Comparative Advantage, Development and Trade, empirical evidence, Evidence on Comparative Advantage from Japan, Factor price equalization, Specific Factors Models, Economics of Offshoring, The Rybczynski Theorem, Trade, Investment, and Migration as Substitutes, Unbundling the Supply Chain.
II.Free trade and tariffs
Paul Krugman. “The One-Minute Trade Policy Theorist.” (powerpoint)
Humphrey, Thomas M. 1987. “Classical and Neoclassical Roots of The Theory of Optimum Tariffs.” Economic Review, Federal Reserve Bank of Richmond.
Broda, Christian, Nuno Limao, and David Weinstein. 2008. “Optimal Tariffs and Market Power: The Evidence.” American Economic Review.
Arkolakis, Costas, Arnaud Costinot and Andres Rodriguez-Clare. 2012. “New Trade Models, Same Old Gains?” American Economic Review.
Kehoe, Timothy J. and Kim J. Ruhl. 2006. “How Important Is the New Goods Margin in International Trade?” NBER Working Paper, and now just published, Journal of Political Economy 2013.
Bernhofen, Daniel M., Zouheir El-Sahli, and RIchard Kneller. 2012. “Estimating the Effects of the Container Revolution on World Trade.” University of Nottingham Discussion Paper Series.
Nunn, Nathan and Daniel Trefler. 2010. “The Structure of Tariffs and Long-Term Growth.” American Economic Review.
Videos: Tariffs v. Quotas, International Trade Disciplines Monopolies, Effective rate of protection, Theory of Optimal Tariffs, Trade and Variety, Does “fair trade” help?, Malawi restrict trade in corn, Market reforms in Bangladesh, John Stuart Mill Terms of trade, The Shipping Container.
III. Heckscher-Ohlin and factor abundance theories of trade
Helpman, Elhanan. 1999. “The Structure of Foreign Trade.” Journal of Economic Perspectives.
Debaere, Peter. 2003. “Factor Abundance and Trade.” Journal of Political Economy.
Deardorff, Alan V. 1979. “Weak Links in the Chain of Comparative Advantage.” Journal of International Economics.
Trefler, Daniel. 1993. “International Factor Price Differences: Leontief Was Right!” Journal of Political Economy.
Davis, Donald R. and David E. Weinstein. 2001. “What Role for International Trade.” NBER Working Paper.
Davis, Donald R. 1995. “Intra-Industry Trade: A Heckscher-Ohlin-Ricardo Approach.” Journal of International Economics.
Deardorff, Alan V. 1982. “The General Validity of the Heckscher-Ohlin Theorem.” American Economic Review.
Videos: What is at Stake in Trade Theories?, The Heckscher-Ohlin Theorem, Evidence on the Heckscher-Ohlin Theorem.
IV. Increasing Returns
Donaldson, David. “Increasing Returns to Scale and Monopolistic Trade.” Powerpoint, on-line.
Helpman, Elhanan. 1987. “Imperfect Competition and International Trade: Evidence from Fourteen Industrial Countries.” Journal of the Japanese and International Economics.
Davis, Donald R. and David E. Weinstein. 2003. “Market Access, Economic Geography, and Comparative Advantage: An Empirical Test.” Journal of International Economics.
Baldwin, Richard and James Harrigan. 2010. “Zeros, Quality, and Space: Trade Theory and Trade Evidence.” NBER Working Paper.
Antweiler, Werner and Daniel Trefler. 2000. “Increasing Returns and All That: A View from Trade.” NBER Working Paper.
Debaere, Peter. 2005. “Monopolistic Competition and Trade, Revisited: Testing the Model Without Testing for Gravity.” Journal of International Economics.
Yi, Kei-Mu. 1999. “Can Vertical Specialization Explain the Growth of World Trade?” Journal of Political Economy.
Harrigan, James. 2001. “Specialization and the Volume of Trade: Do the Data Obey the Laws?” NBER Working Paper.
Bernard, Andrew B., J. Bradford Jensen, Stephen Redding, and Peter K. Schott. 2007. “Firms in International Trade.” NBER Working Paper.
Helpman, Elhanan. 2013. “Foreign Trade and Investment: Firm-Level Perspectives.” NBER Working Paper.
Tybout, James R. 2001. “Plant- and Firm-Level Evidence on “New” Trade Theories.” NBER Working Paper.
Bernard, Andrew B. and J. Bradford Jensen. 2004. “Why Some Firms Export.” Review of Economics and Statistics.
Videos: Trade and External Economies of Scale, Monopolistic Competition and International Trade, Trade and Increasing Returns: Evidence, Paul Romer, Robert Torrens on strategic trade policy, The Economics of Bollywood.
V. Gravity models
Anderson, James and Eric van Wincoop. 2004. “Trade Costs” Journal of Economic Literature.
Head, Keith. 2011. “Gravity for Beginners.” Presented at US-Canada Border Conference.
Hummels, David. 2007. “Transportation Costs and International Trade in the Second Era of Globalization.” Journal of Economic Perspectives.
Deardorff, Alan V. 1998. “Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?” NBER Working Paper.
Feenstra, Robert C., James R. Markusen, and Andrew K. Rose. 2001. “Using the Gravity Equation to Differentiate Among Alternative Theories of Trade.” The Canadian Journal of Economics.
Evenett, Simon J. and Wolfgang Keller. 1998. “On Theories Explaining the Success of the Gravity Equation.” NBER Working Paper.
Trefler, Daniel. 1995. “The Case of the Missing Trade and Other Mysteries.” American Economic Review.
Anderson, James and Eric van Wincoop. 2003. “Gravity with Gravitas: A Solution to the Border Puzzle.” American Economic Review.
Novy, Dennis. 2012. “Gravity Redux: Measuring International Trade Costs with Panel Data.” Economic Inquiry.
Eaton, Jonathan and Samuel Kortum. 2002. “Technology, Geography, and Trade.” Econometrica.
Donaldson, David. 2011. “Gravity Models.” No Journal—powerpoint.
Rossi-Hansberg, Esteban. 2005. “A Spatial Theory of Trade.” American Economic Review.
Chaney, Thomas. 2008. “Distorted Gravity: The Intensive and Extensive Margins of International Trade.” American Economic Review.
Anderson, James E. 1979. “A Theoretical Foundation for the Gravity Equation.” American Economic Review.
Video: The Gravity Equation and the Costs of Trade.
VI. Trade in economic history
Blecker, Robert A. 1997. “The ‘Unnatural and Retrograde Order’: Adam Smith’s Theories of Trade and Development Reconsidered.” Economica.
Irwin, Douglas. 2002. “Interpreting the Tariff-Growth Correlation of the Late Nineteenth Century.” American Economic Review.
Irwin, Douglas. 2002. “Did Import Substitution Promote Growth in the Late Nineteenth Century?” NBER Working Paper.
Clemens, Michael A. and Jeffrey G. Williamson. 2001. “A Tariff-Growth Paradox? Protection’s Impact on the World Around 1875-1997.” NBER Working Paper.
John Nye, “The Myth of Free Trade Britain and Fortress France,” Journal of Economic History, 1991.
Harrison, Ann and Andres Rodriguez-Clare. 2009. “Trade, Foreign Investment, and Industrial Policy for Developing Countries.” NBER Working Paper.
Irwin, Douglas. 1997. “From Smoot-Hawley to Reciprocal Agreements: Changing the Course of U.S. Trade Policy in the 1930s.” NBER Working Paper.
Irwin, Douglas. 1998. “The Smoot-Hawley Tariff: A Quantitative Assessment.” The Review of Economic Statistics.
Crowley, Meredith A. and Xi Luo. 2011. “Understanding the Great Trade Collapse of 2008-09 and the Subsequent Trade Recovery.” Journal of Economic Perspectives.
Gopinath, Gita and Oleg Itskhoki. 2009. “Trade Prices and the Global Trade Collapse of 2008-2009.” NBER Working Paper.
Francois, Joseph and Julia Woerz. 2009. “The Big Drop: Trade and the Great Recession.” No Journal, article online.
Videos: Corn Law debates, Friedrich List, Robert Torrens on sliding tariffs, The deindustrialization of India, Tariffs and Growth in the late 19thCentury, South Korea and Industrial Policy, The Smoot-Hawley Tariff, Why Did Trade Plummet in the Great Recession?
VII. FDI and multinationals
Blonigen, Bruce A. 2005. “A Review of the Empirical Literature on FDI Determinants.” NBER Working Paper.
Ramondo, Natalia and Andres Rodriguez-Clare. 2009. “Trade, Multinational Production, and the Gains from Openness.” NBER Working Paper.
Antras, Pol and Stephen R. Yeaple. 2013. “Multinational Firms and the Structure of International Trade.” NBER Working Paper.
Videos: Basics of multinational corporations, Intra-firm Trade, Intra-industry Trade, Gains from Multinationals, Who Gains from FDI?, Productivity in firms, Foreign investment in India, Competition from foreign retailers, What is a Maquiladora? Introduction to NAFTA, NAFTA and Mexican Agriculture, The Effect of NAFTA on the Mexican Economy.
VIII. The politics of trade
Grossman, Gene M. and Elhanan Helpman. 1994. “Protection for Sale.” American Economic Review.
Goldberg, Pinelopi Koujianou and Giovanni Maggi. 1999. “Protection for Sale: An Empirical Investigation.” American Economic Review.
Mayda, Anna Maria and Dani Rodrik. 2005. “What are Some People (and Countries) More Protectionist than Others?” European Economic Review.
Grossman, Gene M. and Elhanan Helpman. 1995. “The Politics of Free-Trade Agreements.” American Economic Review.
Harrison, Ann and Jason Scorse. 2010. “Multinational and Anti-Sweatshop Activism.” American Economic Review.
Videos: The Political Economy of Tariffs, Does Trade Help the Environment?, Regulation as a Major Trade Barrier, Who Supports Free Trade?, The Cultural Diversity Critique of Markets.
Some extra readings and videos will be added, as global events indicate.
Assorted links
1. “Brent is a retired laboratory animal…”
2. Lin Ostrom was originally rejected from the UCLA economics Ph.d. program, and other points from the history of the tragedy of the commons idea.
3. Syrian discussion of where to seek asylum.
4. Robotic doorknob disinfector.
5. An Indian student’s impressions of America.
Why the theory of comparative advantage is overrated
Paul Samuelson once produced comparative advantage as an example of an economic theorem which was both true and non-trivial. Obviously the theorem holds as proven, but how on the mark is the theory as an actual explanatory device? (For background on the theory, you can start with Alex’s video here). I hold a few reservations:
1. In virtually every other context, we insist that the dynamic perspective is critically important, yet we are remarkably content with the static take of comparative advantage. If comparative advantage puts you into a job, or puts your economy into sectors, with no good learning curves, woe unto you.
2. The theory sits uneasily with the observation that long-term unemployment is indeed possible.
3. They do indeed send horses to the glue factory, so to speak.
4. In the real world, the “lawyer” and the “typist” are often not fully segregated workers, but they interact, whether in the workplace, in society, or politically. Complementarity and O-Ring effects may be more important than comparative advantage effects, paging Gilbert Arenas.
5. It is easy enough to see how the theory works when you move from one person to two, or from five persons to ten. But how about when two large nations trade with each other? The macro embodiment of comparative advantage, namely the Heckscher-Ohlin theorem, has at best a mixed performance empirically and capital and labor endowments do not appear to predict the content or amount of trade very well. Furthermore even defining comparative advantage (how do you measure the quality of labor or capital? Is the U.S. in fact a capital-intensive or labor-intensive nation, taking qualities into account? How about human capital? etc.) is deeply problematic once you move past the basic Heckscher-Ohlin assumption that different nations have access to the same production function (and of course that assumption is obviously false).
6. In the simplest explanation of comparative advantage, we measure the productivities of the lawyer and the typist in terms of hours, a physical unit. Usually, beyond a single input world, we need market prices to measure comparative advantage. But then the original comparative advantages are endogenous to specialization decisions and other economic factors. The true theory of comparative advantage, for a multi-factor world, isn’t nearly so simple. It also can be said that the initial comparative advantages are in fact endogenous to trade.
7. Many of the most important gains from trade come from other mechanisms, including specialization, increasing returns, or the generation of commercial networks which lead to a later transmission of ideas and technologies. That is not exactly an argument against comparative advantage, but it does suggest the idea is only one part of the case for trade.
August 31, 2013
*Concise History of the Arabs*
That is the new and excellent book by John McHugo, and it is perhaps the best short one-volume introduction to its topic (with Hourani being the best single longer book). Here is one short bit, concerning 1925 in Syria:
Some local Muslim and Christian villages joined the Druze, and nationalists stirred up activity elsewhere. The conservative Sunni city of Hama exploded into sudden revolt, and had to be crushed by punitive bombing by the French air force, but the insurgents only fled to the countryside and continued fighting. The revolt also gripped the Ghutah, the cultivated area around Damascus. The city itself rose. Realising that the capital had come under effective rebel control, the French army responded in the same way as in Hama and bombarded it indiscriminately, killing 1,500 people and causing an international outcry. Once again, this forced the rebels out into the countryside where they disrupted supply routes.
Most of the book is actually more conceptual and more “macro” than that passage.
Assorted links
1. “…he has been corresponding with himself for the last 26 days as an officer wearing different hats.” (India).
2. Economics as taught through the contributions of its Nobel Laureates.
3. Short FT profile of Raghuram Rajan.
4. What is the economy of Gibraltar based upon, and why is it growing at 7.8%?
American violence is higher than you think
From Christopher Glazek:
…the figures that suggest that violence has been disappearing in the United States contain a blind spot so large that to cite them uncritically, as the major papers do, is to collude in an epic con. Uncounted in the official tallies are the hundreds of thousands of crimes that take place in the country’s prison system, a vast and growing residential network whose forsaken tenants increasingly bear the brunt of America’s propensity for anger and violence.
Crime has not fallen in the United States—it’s been shifted. Just as Wall Street connived with regulators to transfer financial risk from spendthrift banks to careless home buyers, so have federal, state, and local legislatures succeeded in rerouting criminal risk away from urban centers and concentrating it in a proliferating web of hyperhells. The statistics touting the country’s crime-reduction miracle, when juxtaposed with those documenting the quantity of rape and assault that takes place each year within the correctional system, are exposed as not merely a lie, or even a damn lie—but as the single most shameful lie in American life.
From 1980 to 2007, the number of prisoners held in the United States quadrupled to 2.3 million, with an additional 5 million on probation or parole.
Here is one detail:
…the Justice Department finally released an estimate of the prevalence of sexual abuse in penitentiaries. The reliance on filed complaints appeared to understate the problem. For 2008, for example, the government had previously tallied 935 confirmed instances of sexual abuse. After asking around, and performing some calculations, the Justice Department came up with a new number: 216,000. That’s 216,000 victims, not instances. These victims are often assaulted multiple times over the course of the year. The Justice Department now seems to be saying that prison rape accounted for the majority of all rapes committed in the US in 2008, likely making the United States the first country in the history of the world to count more rapes for men than for women.
Here is more, via Eli Dourado.
North Korea Fact of the Day
North Korea is the only country in the world where it is legal to use, sell, transport and cultivate marijuana.
From the comments
This is from Ted Craig:
Another way to look at the effect of mechanization is to look at how it affected the other living employees of farmers. The U.S. horse population peaked at 26.5 million in 1915. It declined rapidly after that, hitting a low of just over 3 million in 1960. While it is about 9 million now, that’s because of increased ownership as pets.
I’m not saying humans will be destroyed like horses, but it raises some questions about the ease of transition.
August 30, 2013
Strategies for wealth preservation
The Fuggerei is the world’s oldest social housing complex still in use. It is a walled enclave within the city of Augsburg, Bavaria. It takes it name from the Fugger family and was founded in 1516 by Jakob Fugger the Younger (known as “Jakob Fugger the Rich”) as a place where the needy citizens of Augsburg could be housed. By 1523, 52 houses had been built, and in the coming years the area expanded with various streets, small squares and a church. The gates were locked at night, so the Fuggerei was, in its own right, very similar to a small independent medieval town. It is still inhabited today, affording it the status of being the oldest social housing project in the world.
…The Fuggerei is supported by a charitable trust established in 1520 which Jakob Fugger funded with an initial deposit of 10,000 guilders. According to the Wall Street Journal the trust has been carefully managed with most of its income coming from forestry holdings, which the Fugger family favored since the 17th century after losing money on higher yielding investments. The annual return on the trust has ranged from an after inflation rate of 0.5% to 2%. Currently the trust is administered by Wolf-Dietrich Graf von Hundt.
Someone (not me) could write a very good popular economic history book on how they managed this success.
For the pointer I thank Patrick of Singapore.
Assorted links
1. How is the Kumbh Mela so easy for India to pull off?: “I asked Mehrotra how this place managed to function so well, especially in contrast to so many permanent Indian cities. “The Kumbh Mela is like an Indian wedding,” he said. “You can do things at this level of intensity only because you know it will be over soon.””
3. Are fans of losing teams less healthy? Or is that result spurious correlation? The study is here.
4. Threading the needles in Syria.
5. Financial incentives behind overdiagnosis.
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