Robert Feenstra and Alan Taylor International Economics PDF 26: A Modern Textbook for a Modern Audience
Robert Feenstra and Alan Taylor International Economics PDF 26
International economics is a branch of economics that studies how countries interact with each other through trade, finance, migration, and other policies. It helps us understand how globalization affects our lives, our businesses, and our societies. It also helps us evaluate the costs and benefits of different policies that affect international transactions.
robert feenstra and alan taylor international economics pdf 26
Robert Feenstra and Alan Taylor are two of the most prominent researchers and teachers in the field of international economics. They have written several books and articles on various topics related to international trade and international macroeconomics. They have also contributed to the development of new theories, models, methods, data, and evidence that have advanced our knowledge and understanding of international economics.
One of their most popular works is their textbook "International Economics", which is now in its fourth edition. This textbook provides a comprehensive, rigorous, modern, and empirical introduction to both international trade and international macroeconomics. It covers both the established core content as well as the emerging topics and issues that have arisen from recent research and events. It also links theory to real-world applications and policy debates throughout the book.
In this article, we will review the main content and features of their textbook "International Economics". We will follow the structure of their book, which is divided into two parts: Part I on International Trade and Part II on International Macroeconomics. We will summarize each chapter briefly and highlight some of the key concepts, models, examples, questions, problems, data sets, and exercises that are included in each chapter. We will also provide some references to other sources that complement or extend their textbook.
Part I: International Trade
Part I of their textbook covers international trade theory and policy. It consists of ten chapters that explain how countries trade with each other, why they trade, what they trade, who gains and who loses from trade, and how trade policies affect trade outcomes.
Chapter 1: Introduction to International Trade
This chapter introduces the basic concepts and facts about international trade. It answers three main questions:
What are the patterns and trends of international trade?
Chapter 2: Trade and Technology: The Ricardian Model
This chapter introduces the Ricardian model of comparative advantage, which is one of the oldest and simplest models of international trade. It answers three main questions:
What is the Ricardian model of comparative advantage and how does it explain trade patterns?
What are the effects of trade on wages, income distribution, and welfare in the Ricardian model?
How does technological change affect trade and welfare in the Ricardian model?
The Ricardian model assumes that countries differ in their productivity of labor in producing different goods. It shows that countries can benefit from trade by specializing in the goods that they can produce relatively more efficiently (with lower opportunity costs) and importing the goods that they can produce relatively less efficiently (with higher opportunity costs). It also shows that trade can increase the real wages and welfare of both countries, but it can also create winners and losers within each country depending on the relative prices of the goods. Finally, it shows that technological change can affect trade patterns and welfare by changing the comparative advantage of countries.
Chapter 3: Gains and Losses from Trade in the Specific-Factors Model
This chapter introduces the specific-factors model, which is a more realistic and complex model of international trade than the Ricardian model. It answers three main questions:
What is the specific-factors model and how does it differ from the Ricardian model?
What are the effects of trade on factor prices, output, and welfare in the specific-factors model?
How does trade affect income distribution and political economy in the specific-factors model?
The specific-factors model assumes that countries have two factors of production (labor and capital) and two goods (manufacturing and agriculture). It also assumes that labor is mobile between sectors but capital is specific to each sector. It shows that trade can affect the relative demand and supply of factors and goods, which in turn affect the relative prices of factors and goods. It also shows that trade can increase the aggregate welfare of both countries, but it can also create winners and losers within each country depending on how trade affects their factor incomes. Finally, it shows that trade can create political conflicts and coalitions among different groups of factors owners.
Chapter 4: Trade and Resources: The Heckscher-Ohlin Model
This chapter introduces the Heckscher-Ohlin model, which is another important model of international trade that incorporates factor endowments. It answers three main questions:
What is the Heckscher-Ohlin model and how does it explain trade patterns based on factor endowments?
What are the effects of trade on factor prices, output, and welfare in the Heckscher-Ohlin model?
How does trade affect income distribution and political economy in the Heckscher-Ohlin model?
the factor prices and output levels of both countries, but it can also create winners and losers within each country depending on how trade affects their factor incomes. Finally, it shows that trade can create political conflicts and coalitions among different groups of factors owners.
Chapter 5: Movement of Labor and Capital between Countries
This chapter examines the causes and consequences of international mobility of labor and capital, which are two alternative ways of achieving factor price equalization besides trade. It answers three main questions:
What are the causes and consequences of international migration of labor?
What are the causes and consequences of international mobility of capital?
How do labor and capital movements affect trade patterns, factor prices, output, and welfare?
The chapter shows that labor migration is driven by wage differentials between countries, which reflect differences in labor productivity, labor supply, and labor demand. It also shows that labor migration can reduce wage differentials, increase output and welfare in both countries, but also create winners and losers within each country depending on how migration affects their factor incomes. Similarly, the chapter shows that capital mobility is driven by interest rate differentials between countries, which reflect differences in capital productivity, capital supply, and capital demand. It also shows that capital mobility can reduce interest rate differentials, increase output and welfare in both countries, but also create winners and losers within each country depending on how capital mobility affects their factor incomes. Finally, the chapter shows that labor and capital movements can affect trade patterns by changing the relative factor endowments and comparative advantage of countries.
Chapter 6: Increasing Returns to Scale and Monopolistic Competition
This chapter introduces increasing returns to scale and monopolistic competition, which are two features of modern production and trade that deviate from the standard assumptions of constant returns to scale and perfect competition. It answers three main questions:
What are increasing returns to scale and how do they affect production and trade?
What is monopolistic competition and how does it differ from perfect competition?
How do increasing returns and monopolistic competition affect trade patterns, prices, output, variety, and welfare?
The chapter shows that increasing returns to scale mean that average costs fall as output increases, which creates economies of scale and scope for firms. It also shows that increasing returns to scale can lead to intra-industry trade (trade within the same industry) between similar countries, as well as inter-industry trade (trade across different industries) between different countries. The chapter also shows that monopolistic competition means that firms have some market power and product differentiation, which allows them to charge a markup over marginal cost and offer a variety of products to consumers. It also shows that monopolistic competition can lead to gains from trade due to increased competition, lower prices, higher output, greater variety, and higher welfare.
Chapter 7: Offshoring of Goods and Services
This chapter examines offshoring of goods and services, which is a form of international fragmentation of production that involves relocating some stages of production to foreign countries. It answers three main questions:
What is offshoring and how does it differ from trade in final goods?
What are the drivers and barriers of offshoring?
employment, wages, prices, output, variety, and welfare?
The chapter shows that offshoring is a form of trade in intermediate inputs (parts, components, services) rather than final goods. It also shows that offshoring is driven by technological change, trade liberalization, and factor price differences that reduce the costs of coordination and transportation across countries. It also shows that offshoring is constrained by institutional factors, such as trade barriers, regulations, contracts, and norms that increase the costs of doing business across countries. The chapter also shows that offshoring can affect production, employment, wages, prices, output, variety, and welfare in complex and ambiguous ways. It can create gains from trade due to increased specialization, efficiency, and innovation, but it can also create losses from trade due to increased competition, adjustment costs, and distributional effects.
Chapter 8: Import Tariffs and Quotas under Perfect Competition
This chapter analyzes import tariffs and quotas under perfect competition, which are two common types of trade policies that restrict imports. It answers three main questions:
What are tariffs and quotas and how do they affect trade flows, prices, output, welfare, and government revenue?
How do tariffs and quotas compare in terms of their effects on trade policy?
How do tariffs and quotas affect income distribution and political economy?
corruption, rent seeking, and trade wars.
Chapter 9: Import Tariffs and Quotas under Imperfect Competition
This chapter analyzes import tariffs and quotas under imperfect competition, which are two common types of trade policies that restrict imports in the presence of market power and product differentiation. It answers three main questions:
How do tariffs and quotas affect trade flows, prices, output, welfare, and government revenue under imperfect competition?
How do tariffs and quotas affect market structure, firm behavior, strategic trade policy, dumping, antidumping duties, countervailing duties, escape clauses, voluntary export restraints, local content requirements, export subsidies?
The chapter shows that tariffs and quotas under imperfect competition have similar effects as under perfect competition, but they can also have additional effects due to the presence of market power and product differentiation. It also shows that tariffs and quotas can affect the number and size of firms in the market, their pricing and output decisions, their profits and losses, and their incentives to engage in strategic trade policy. It also shows that tariffs and quotas can lead to various forms of unfair trade practices, such as dumping, antidumping duties, countervailing duties, escape clauses, voluntary export restraints, local content requirements, export subsidies. The chapter also shows that these practices can have complex and ambiguous effects on trade policy and welfare depending on the market structure and the policy objectives.
Chapter 10: Export Policies in Resource-Based Industries
This chapter examines export policies in resource-based industries, which are industries that rely on natural resources or raw materials as inputs. It answers three main questions:
How do export policies affect trade flows, prices, output, welfare, government revenue under resource-based industries?
How do export policies affect market structure, firm behavior, strategic trade policy, cartel formation, rent seeking?
The chapter shows that export policies in resource-based industries can take various forms, such as export taxes, export subsidies, export bans, export quotas, export cartels. It also shows that export policies can affect the supply and demand of the resource or the final good, which in turn affect the domestic and world prices, output levels, welfare levels, and government revenue or rents. The chapter also shows that export policies can affect the market structure and firm behavior in resource-based industries by creating incentives for collusion, cooperation, or competition among exporters. It also shows that export policies can lead to strategic trade policy and rent seeking behavior by influencing the bargaining power and the distribution of rents among exporters.
Part II: International Macroeconomics
Part II of their textbook covers international macroeconomics theory and policy. It consists of seven chapters that explain how countries interact with each other through exchange rates, balance of payments, and macroeconomic policies. It covers both the short-run and the long-run aspects of international macroeconomics.
Chapter 11: The Balance of Payments
This chapter introduces the balance of payments, which is a record of all international transactions between a country and the rest of the world. It answers three main questions:
What is the balance of payments and how is it measured?
What are the components of the balance of payments (current account, capital account, financial account)?
What are the sources of balance of payments imbalances (saving-investment gap, trade deficit/surplus)?
The chapter shows that the balance of payments is divided into two main accounts: the current account and the capital and financial account. The current account records transactions in goods, services, income, and transfers. The capital and financial account records transactions in assets, such as stocks, bonds, loans, and foreign direct investment. The chapter also shows that the balance of payments must always balance in accounting terms, meaning that any surplus or deficit in one account must be offset by an equal surplus or deficit in another account. The chapter also shows that the balance of payments imbalances reflect underlying economic imbalances in saving and investment or in trade competitiveness.
Chapter 12: The Foreign Exchange Market
This chapter examines the foreign exchange market, which is where currencies are traded. It answers three main questions:
of payments accounts by showing how international transactions affect the income and wealth of a country. It also shows that national income and wealth accounts are affected by exchange rate changes by showing how exchange rate changes affect the valuation and conversion of domestic and foreign assets and liabilities. The chapter also shows how exchange rate changes can create valuation effects, capital gains or losses, and wealth transfers across countries.
Chapter 15: Output, Exchange Rates, and Macroeconomic Policies in the Short Run
This chapter analyzes the interaction of output, exchange rates, and macroeconomic policies in the short run, which is the period when prices are sticky and output is determined by aggregate demand. It answers three main questions:
How do output, exchange rates, and macroeconomic policies interact in the short run?
What are the effects of fiscal and monetary policies on output, exchange rates, interest rates, and the balance of payments?
How do different exchange rate regimes affect the transmission and effectiveness of macroeconomic policies?
The chapter shows that output, exchange rates, and macroeconomic policies interact in the short run through various channels, such as the IS-LM-BP model, the aggregate demand-aggregate supply model, and the Mundell-Fleming model. It also shows that fiscal and monetary policies can affect output, exchange rates, interest rates, and the balance of payments in different ways depending on the type of policy, the type of shock, and the type of exchange rate regime. The chapter also shows that different exchange rate regimes can affect the transmission and effectiveness of macroeconomic policies by changing the degree of exchange rate flexibility, monetary policy autonomy, and capital mobility.
Chapter 16: Output, Exchange Rates, and Macroeconomic Policies in the Long Run
This chapter analyzes the interaction of output, exchange rates, and macroeconomic policies in the long run, which is the period when prices are flexible and output is determined by aggregate supply. It answers three main questions:
How do output, exchange rates, and macroeconomic policies interact in the long run?
What are the effects of fiscal and monetary policies on output, exchange rates, interest rates, inflation, and the balance of payments in the long run?
How do different exchange rate regimes affect the adjustment and sustainability of macroeconomic policies in the long run?
The chapter shows that output, exchange rates, and macroeconomic policies interact in the long run through various channels, such as the long-run IS-LM-BP model, the long-run aggregate demand-aggregate supply model, and the Dornbusch overshooting model. It also shows that fiscal and monetary policies can affect output, exchange rates, interest rates, inflation, the type of policy, the type of shock, and the type of exchange rate regime. The chapter also shows that different exchange rate regimes can affect the adjustment and sustainability of macroeconomic policies by changing the degree of exchange rate flexibility, monetary policy autonomy, and capital mobility. The chapter also shows that exchange rate regimes can affect the credibility and consistency of macroeconomic policies by creating incentives or constraints for policy makers.
Chapter 17: Fixed Exchange Rates and Foreign Exchange Intervention
This chapter examines fixed exchange rates and foreign exchange intervention, which are two ways of managing exchange rates that deviate from the pure floating exchange rate regime. It answers three main questions:
How are fixed exchange rates maintained and defended by foreign exchange intervention?
What are the costs and benefits of fixed exchange rates?
What are the causes and consequences of currency crises?
The chapter shows that fixed exchange rates are maintained and defended by foreign exchange intervention, which is the purchase or sale of foreign currency by the central bank to influence the exchange rate. It also shows that foreign exchange intervention affects the money supply and the interest rate, which in turn affect the balance of paym