This course looks at different underlying causes of international trade and multinational activities and how this may relate to changing patterns of trade, income distributional consequences and multinational firms' strategic decisions. Micro-economic tools will be used to explore theoretical models of international trade. Presented theories will be complemented by references to related empirical studies.One part of the course will mainly review key features of traditional models of trade based on the assumption of perfect competition,  and look at an extension of traditional Heckscher-Ohlin theory to consider global pollution and vertical FDI. The other part of the course will deal with models of trade beyond perfect competition with a particular eye on the formation of multinational enterprises. After completing the course, students should be able to compare - at a basic level of formal analysis - major models of international trade and be able to distinguish between them in terms of their assumptions and economic implications.

This course comprises both lectures and practice sessions. For practice sessions, students are asked to prepare problem sets at home in order to review and deepen understanding of modeling approaches (possibly incl. simulations). Answers to the exercises will have to be submitted via Moodle: Students should be ready to discuss their suggested solutions during practice sessions. To prepare and practice for the final exam and as a follow-up to practice sessions, students are also asked to solve online quizzes and a mock exam. Problem sets:Problem sets will be made available via learning platform Moodle.Students are asked to find answers and tick boxes for questions they are willing to present. Additionally, students are required to upload their answers – one file with all answers - via Moodle on Wednesday 4 p.m. before a practice session.Further details to be discussed at the beginning of the course. 

Tentative Schedule: Part 0: Introductory Part(Equilibrium concepts and )General Equilibrium in the context of International Trade ModelsPart A: Traditional Trade Models and Comparative AdvantageRicardian Trade ModelHeckscher-Ohlin Model of TradeGlobal PollutionVertical FDIPart B: Multinational Firms and Competitive AdvantageMonopolistic Competition and Intra-Industry TradeMultinational Firms and Horizontal FDI Strategic Decisions/Boundaries of Multinational Firms

Sufficient prior knowledge of microeconomics, statistics and mathematics as well as introductory knowledge of international trade, in particular. Comprehensive knowledge ofVO StEOP – Introduction to EconomicsVC MicroeconomicsVO Introduction to International EconomicsVC MacroeconomicsVO: Methodology 1VO: Methodology 2

Markusen & Maskus: International trade: Theory and evidence, McGrawHill, 1995  (Part A)V. Marrewijk, International Trade, Oxford University Press, 2017 (Part B)Feenstra, Advanced international trade, Princeton University Press, 2015Additionally:Copeland and Taylor, Trade and the Environment: Theory and Evidence, Princeton University Press, 2003Navaretti and Venables, Multinational Firms in the World Economy, Princeton University Press, 2015Irwin, Free Trade Under Fire, Princeton University Press 2020A detailed list of references will be provided via Moodle.

Throughout the semester, there will be  homework exercises to prepare for practice sessions and quizzes to wrap-up these practice sessions.  Further, you are expected to participate in a mock exam to prepare for the final  exam. Attendance of practice sessions is mandatory. However, you may be excused for one session.During practice sessions, you will be randomly asked to present your answer of any of the exercises that you marked in the corresponding Kreuzelliste.The final exam will take place beginning of July and/or end of September.  The exam  comprises 10 multiple-choice questions with four statements each.Please note that you are required to successfully complete practice sessions and pass the final exam in order to receive a positive rating for International Microeconomics. If you fail one part, you will have to re-attend the entire course in another semester. Further details will be available in Moodle and announced in class.

Course's content (both lecture and practice sessions)

For homework exercises, quizzes and the mock exam a total max. of 60 credits can be earned: 10 for each of four problem sets, 4 for each of four quizzes and 4 from the mock exam. For the final exam the max. attainable score is 40 credits.  You should reach 36 out of 60 from homework assignments and quizzes. For the exam, pass mark is 28 out of 40. Both your exam and assignments result account for 50% of your grade.REPEATED ABSENCE WITHOUT PRIOR NOTIFICATION WILL RESULT IN NEGATIVE RATING. There is a possibility to receive bonus credits for especially active course participation.