International Trade and

Development Economics
Table of content
 Module 1 – Development Economics
Week I.I
Todaro & Smith - chapter III: Classic theories of growth and development

𝛥𝑌 𝑠
𝑔= =𝑐
𝑌 𝑌 = 𝐾 𝛼 (𝐴𝐿)1−𝛼
• • •

• •

Todaro & Smith - chapter IV: Contemporary models of underdevelopment

𝐿
𝑊=1
𝑊>1
𝑁
𝐿 = 𝐹 + 𝑐𝑄

𝑌
𝑁
𝑃 = 𝑀𝐶 = 1
 𝑃=1 𝑀𝐶 < 1

•
• 𝐹

•
•
•
•

•
•
•
•

•
•

𝐵𝐹(𝑞𝑖 𝑞𝑗 ) = 𝑞𝑖 𝑞𝑗
𝑞𝐻2 +
𝑞𝐿2 > 2𝑞𝐻 𝑞𝐿
Lecture I - How to develop a Country

McMillan, Rodrik & Verduzco-Gallo - Globalization, Structural Change, and Productivity

Growth, with an Update on Africa

𝛥𝑌𝑡 = ∑ 𝜃𝑖,𝑡−𝑘 𝛥𝑦𝑖,𝑡 + ∑ 𝑦𝑖,𝑡 𝛥𝜃𝑖,𝑡

𝑖=𝑛 𝑖=𝑛
Seminar I

Week I.II
Todaro & Smith - chapter VII: Urbanisation and Rural-Urban migration
 𝐿𝑀
𝐿𝑀 +𝐿𝑈

𝐿𝑀
̅𝑀
𝑊
𝐿𝑀 +𝐿𝑈

𝐿𝑀
(𝐿 ̅̅̅̅̅
𝑊𝑀 ) = 𝑊𝐴
𝑀 +𝐿𝑈
Lecture II - How to develop a Country (p.2) & Urbanization and Migration

Sicular et al - Urban-rural income gap and Inequality in China

𝑛 𝑛
1 𝜇 1 𝑦𝑖
𝐼𝑇𝐿 = ∑ 𝑙𝑛 ( ) 𝑙 𝑇𝑇 = ∑ [𝑙𝑛 ( ) 𝑦𝑖 ]
𝑛 𝑦𝑖 𝑛𝜇 𝜇
𝑖=1 𝑖=1

𝐼 = ∑ 𝑤𝑔 𝐼𝑔 (𝜇1 , 𝜇2 , ⋯ 𝜇𝑘 )
𝑔=𝑙
 𝑙𝑛(𝑦 𝑔 ) = 𝛼𝑔 + 𝛽𝑔 𝑋𝑔 + 𝜀 𝑔

Seminar II
Week II.I
Todaro & Smith - chapter VIII: Human Capital (education and health)

𝐸𝑡 − 𝑁𝑡
∑
(1 + ⅈ)𝑡
 𝐷𝐴𝐿𝑌 = 𝑦𝑒𝑎𝑟𝑠 𝑜𝑓 𝑙ⅈ𝑓𝑒 𝑙𝑜𝑠𝑡 + 𝑙𝑜𝑠𝑡 𝑦𝑒𝑎𝑟𝑠 𝑡𝑜 𝑑ⅈ𝑠𝑎𝑏ⅈ𝑙ⅈ𝑡𝑦

Lecture III
World Bank Report 2009 - Overview

• •
•

• • •

Seminar III - CCT’s

Week II.II
Todaro & Smith - chapter IX: agricultural transformation & rural development

2
3

2
3

1
2

•
Lecture IV - Agriculture in development

•
•
•
•
• •

•
•
Module 2 – International Trade
Week III.I
Todaro & Smith - chapter XII.1-3: international trade theory & development strategy

𝑃𝑥
𝑃𝑚
Krugman, Obstsfeld & Melitz - chapter III: Labour Productivity and Comparative
Advantage: The Ricardian Model

•
1
o 𝑙𝑎𝑏𝑜𝑢𝑟 𝑢𝑛ⅈ𝑡 𝑟𝑒𝑞𝑢ⅈ𝑟𝑒𝑚𝑒𝑛𝑡 (𝑎𝐿𝑋 ) =
𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦

∗
▪ 𝑎𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝑎𝑑𝑣𝑎𝑛𝑡𝑎𝑔𝑒 = 𝑎𝐿𝑋 < 𝑎𝐿𝑋
o 𝑡𝑜𝑡𝑎𝑙 𝑙𝑎𝑏𝑜𝑢𝑟 𝑠𝑢𝑝𝑝𝑙𝑦 (𝐿)
o 𝑝𝑟𝑜𝑑𝑢𝑐𝑡ⅈ𝑜𝑛 𝑝𝑜𝑠𝑠ⅈ𝑏ⅈ𝑙ⅈ𝑡𝑦 𝑓𝑟𝑜𝑛𝑡ⅈ𝑒𝑟 (𝑃𝑃𝐹) = 𝑎𝐿𝑋 𝑄𝑋 + 𝑎𝐿𝑌 𝑄𝑌 ≤ 𝐿
𝑎
o 𝑜𝑝𝑝𝑜𝑟𝑡𝑢𝑛ⅈ𝑡𝑦 𝑐𝑜𝑠𝑡 (𝑂𝐶) = 𝑎𝐿𝑋
𝐿𝑌

𝑃
o 𝑤𝑎𝑔𝑒 (𝑤) = 𝑎 𝑋
𝐿𝑋

𝑃𝑋
o 𝑟𝑒𝑙𝑎𝑡ⅈ𝑣𝑒 𝑝𝑟ⅈ𝑐𝑒 (𝑃) =
𝑃𝑌
•

▪ 𝑃 = 𝑎𝐿𝑋
𝐿⁄
𝑎𝐿𝑋
o 𝑟𝑒𝑙𝑎𝑡ⅈ𝑣𝑒 𝑠𝑢𝑝𝑝𝑙𝑦 (𝑆) = 𝐿∗⁄ ∗
𝑎𝐿𝑌
 •

Lecture V - Comparative Advantage

Seminar V

Week III.II
Krugman, Obstsfeld & Melitz - chapter V: Resources and Trade: The Heckscher-Ohlin
Model

• 𝑝𝑟𝑜𝑑𝑢𝑐𝑡ⅈ𝑜𝑛 𝑓𝑢𝑛𝑐𝑡ⅈ𝑜𝑛 (𝑄𝑋 ) = 𝑄𝑋 (𝐾𝑋 𝐿𝑋 )

• 𝑢𝑛ⅈ𝑡 𝑟𝑒𝑞𝑢ⅈ𝑟𝑒𝑚𝑒𝑛𝑡 ⅈ𝑛𝑝𝑢𝑡: 𝑎𝐿𝑋 , 𝑎𝐾𝑋 , 𝑎𝐿𝑌 , 𝑎𝐾𝑌
o

• 𝑐𝑎𝑝ⅈ𝑡𝑎𝑙 𝑟𝑒𝑠𝑠𝑜𝑢𝑟𝑐𝑒 𝑐𝑜𝑛𝑠𝑡𝑟𝑎ⅈ𝑛𝑡 = 𝑎𝐾𝑋 𝑄𝑋 + 𝑎𝐾𝑌 𝑄𝑌 ≤ 𝐾

• 𝑙𝑎𝑏𝑜𝑢𝑟 𝑟𝑒𝑠𝑠𝑜𝑢𝑟𝑐𝑒 𝑐𝑜𝑛𝑠𝑡𝑟𝑎ⅈ𝑛𝑡 = 𝑎𝐿𝑋 𝑄𝑋 + 𝑎𝐿𝑌 𝑄𝑌 ≤ 𝐿

• 𝑒𝑐𝑜𝑛𝑜𝑚𝑦 ′ 𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑡ⅈ𝑜𝑛 (𝑉) = 𝑃𝑋 𝑄𝑋 + 𝑃𝑌 𝑄𝑌

o
 𝑃𝑋
o −
𝑃𝑌
•
o 𝑤𝑎𝑔𝑒 − 𝑟𝑒𝑛𝑡𝑎𝑙 𝑟𝑎𝑡ⅈ𝑜 = 𝑤⁄𝑟
o 𝑙𝑎𝑏𝑜𝑢𝑟 − 𝑐𝑎𝑝ⅈ𝑡𝑎𝑙 𝑟𝑎𝑡ⅈ𝑜 = 𝐿⁄𝐾
▪

•
o
o

•
•

• •

•
Lecture VI - Heckscher Ohlin factor proportions theory
Seminar VI

Classical trade theories summary

𝑎𝐿𝑋
𝑎𝐿𝑋 𝑎𝐿𝑋 𝑎𝐾𝑋
𝑎𝐿𝑌 𝑎𝐿𝑌 𝑎𝐿𝑌
𝑎𝐾𝑌
Week IV.I
Todaro & Smith - chapter XII.4: Critique of traditional free-trade in country
development

•


• o

• 
• 

•
•

• 

•

•
•

• 
Krugman, Obstsfeld & Melitz - chapter VII: External Economies of Scale and the
International Location of Production







o
o
o

Krugman, Obstsfeld & Melitz - chapter VIII: Firms in the Global Economy: Export
Decisions, Outsourcing, and Multinational Enterprises


o
▪ 𝑑𝑒𝑚𝑎𝑛𝑑 𝑐𝑢𝑟𝑣𝑒: 𝑄 = 𝐴 − 𝐴𝑃
𝑄
▪ 𝑚𝑎𝑟𝑔ⅈ𝑛𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 (𝑀𝑅) = 𝑃 − 𝐵
•

▪ 𝑐𝑜𝑠𝑡𝑠 (𝐶) = 𝑐𝐹𝑄

𝐶 𝐹
• 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑠𝑡 (𝐴𝐶) = 𝑄 = (𝑄) + 𝑐
o

o 𝑃 > 𝐴𝐶
 o
▪
▪
1
▪ 𝑑𝑒𝑚𝑎𝑛𝑑 (𝑄) = 𝑆 [𝑛 − 𝑏(𝑃 − 𝑃̅)]
•

𝐹 𝐹
▪ 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑠𝑡 (𝐴𝐶) = 𝑄
+ 𝑐 = (𝑛 𝑆 ) + 𝑐
•
𝑄
▪ 𝑚𝑎𝑟𝑔ⅈ𝑛𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 (𝑀𝑅) = 𝑃 − =𝑐
𝑆𝑏
𝑄 1
▪ 𝑝𝑟ⅈ𝑐𝑒 (𝑃) = 𝑐 + =𝑐+
𝑆𝑏 𝑏𝑛
•

o
o
o
o
o
o
▪
▪
•
Lecture VII - Economies of scale and Global Value Chains
Week IV.II
Todaro & Smith - chapter XII.5: Traditional trade strategies and policy mechanisms

Lecture VIII - Trade policy and globalization controversies

Module 3 - Poverty & Inequality
Week V
Todaro & Smith - chapter V: Poverty, Inequality and Development
Measuring Inequality

𝑟𝑒𝑑
 𝐺𝐼𝑁𝐼 = 𝑝𝑢𝑟𝑝𝑙𝑒
o
o

o
 Measuring Absolute Poverty

 𝑇𝐺𝑃 = ∑𝐻
𝑖=1(𝑌𝑃 − 𝑌𝑖 )

𝑇𝐺𝑃
o 𝐴𝑃𝐺 = 𝑁
▪
▪
▪
▪

Poverty, Inequality & Social Welfare


o


o

o




 
 Absolute Poverty

 
o o
o o
 o
o
o
o o

Growth & Poverty

Policy option on Income Inequality

Lecture IX - Poverty Measurement and Analysis

Lecture X - Inequality Measurement and Analysis

Week VI
Lecture XI
Lecture XII - Poverty, Inequality and Growth: International Evidence