Econ330_midterm_review

Econ330_midterm_review - Test #1 Study Guide These...

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Unformatted text preview: Test #1 Study Guide These are the essential concepts and ideas that I expect you to be familiar with for the test. Be sure to also think about how these concepts are related to each other. ECONOMIC THEORIES of TRADE Ricardian model (one factor) Assumptions and set ­up What are the gains from trade? How do changes in the parameters of the model affect outcomes? Smoot Hawley as a “test” of the model Hecksher ­Ohlin model (two factors, two goods) Assumptions and set ­up Resource allocation in the economy What are the gains from trade? Income distribution How do changes in the parameters of the model affect outcomes? Empirical implications for preferences over trade Magee analysis as a “test” of the model Specific factors model (three factors, one mobile and two fixed) Assumptions and set ­up Resource allocation in the economy What are the gains from trade? Income distribution How do changes in the parameters of the model affect outcomes? Preferences of economic actors over trade policy Magee analysis as a “test” of the model Concepts: Opportunity cost Comparative advantage Unit labor requirement Production possibility frontier Absolute advantage Factor abundance Factor intensity Stolper ­Samuelson theorem Heckscher ­Ohlin theorem Diminishing marginal returns POLITICAL THEORIES of TRADE Direct democracy (Mayer and elections) Median voter theorem (Black’s theorem) Heckscher ­Ohlin model with an endogenous tariff Does democracy imply that social welfare will be maximized? (Why?) Specific factors model with an election Collective action problems Weaknesses of the Mayer account Lobbying by special interest groups (Grossman and Helpman) Incentives of policymakers in a representative democracy Economic structure Political structure Politically ­optimal tariffs Distributional implications Evidence to support the model Weaknesses of the Grossman and Helpman model Party ideolody (Dutt and Mitra; Milner and Judkins) Assumptions and set ­up of economy and political structure Dutt and Mitra on policy choices: Theoretical impact of political ideology on tariff choices How do they test their theory? What evidence do they find? Key conclusions Party discipline (McGillivray) Assumptions and set ­up of basic majoritarian model High versus low discipline Marginal versus safe districts Concentrated versus dispersed industries Milner and Judkins on party platforms: Theoretical impact of political ideology on party platforms How do they test their theory? What evidence do they find? Key conclusions How does the level of discipline/marginality/dispersion affect industry protection? How does she test her theory? What evidence does she find? Key conclusions ...
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