polantrasLectureNotes - Economics 2535 Lecture Notes...

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Economics 2535 Lecture Notes Advanced Topics in International Trade: Firms and International Trade Pol Antràs Harvard University Department of Economics Spring 2004
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Contents 1 Introduction and Basic Facts 4 I Firms and the Decision to Export 12 2 Intraindustry Heterogeneity with Fixed Costs of Exporting: Melitz (2003) 13 3 Intraindustry Heterogeneity and Bertrand Competition: Bernard, Eaton, Jensen, and Kortum (2003) 27 4 Firms and the Decision to Export: Empirics 38 4.1 Exporting and Plant-Level Performance . . . . . . . . . . . . . . . . . . 38 4.2 Evidence on Reallocation E ff ects: Pavcnik (2002) . . . . . . . . . . . . 40 5 The Relevance of Sunk Costs 47 II Firms and the Decision to Invest Abroad 52 6 Horizontal FDI: Brainard (1997) 53 7 Exports vs. FDI with Asymmetric Countries: Markusen and Ven- ables (2000) 63 8 Exports vs. FDI with Heterogenous Firms: Helpman, Melitz and Yeaple (2003) 71 9 Vertical FDI: Theory and Evidence 82 1
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III Intermission: The Boundaries of The Firm 96 10 The Theory of The Firm: Transaction-Cost Approaches 97 11 The Theory of The Firm: The Property-Rights Approach 107 12 The Theory of The Firm: Alternative Approaches 120 12.1 The Firm as an Incentive System: Holmstrom and Milgrom (1994) . . . 120 12.2 Formal and Real Authority: Aghion and Tirole (1997) . . . . . . . . . 126 12.3 Authority and Hierarchies: Rosen (1982) . . . . . . . . . . . . . . . . . 129 IV Trade and Organizational Form 137 13 Early Transaction-Cost Approaches 138 13.1 Ethier (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 13.2 Ethier and Markusen (1996) . . . . . . . . . . . . . . . . . . . . . . . . 144 14 The Transaction-Cost Approach in Industry Equilibrium: McLaren (2000) and Grossman and Helpman (2002) 148 14.1 Globalization and Vertical Structure: McLaren (2000) . . . . . . . . . . 148 14.2 Integration vs. Outsourcing in Industry Equilibrium: Grossman and Helpman (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 15 The Property-Rights Approach in International Trade (I): Antràs (2003a) 165 16 The Property-Rights Approach in International Trade (II): Antràs (2003b) and Antràs and Helpman (2004) 182 16.1 Incomplete Contracts and the Product Cycle: Antràs (2003 b ) . . . . . 183 16.2 Global Sourcing with Heterogenous Firms: Antràs and Helpman (2004) 194 2
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Preface These lecture notes review some of the material that I cover in the advanced graduate course in the International Trade that I teach at Harvard University. The course focuses on a fi rm-level approach to international trade and on selected topics in trade policy. I am teaching this class for the fi rst time this Spring, so the notes are likely to contain several typos and mistakes. Comments, suggestions, and corrections would be most welcome. Pol Antràs Department of Economics Harvard University January 2004 3
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Chapter 1 Introduction and Basic Facts In Neoclassical Trade Theory , fi rms are treated as a black box. The supply side of the economy is characterized by a set of production functions according to which the factors of production (capital, labor) are transformed into consumption goods. Moreover, for the most part, the literature assumes constant returns to scale, under which the size of the fi rm is indeterminate (the general equilibrium only pins down the size of the sector or industry to which the fi rm belongs).
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