EC6054 International Finance and Trade

Essay Titles for Coursework

General Guidance:

Essay Guidance: Write an essay on one of the following topics. Your essay answer should
demonstrate wide reading, a good understanding of the theoretical and empirical material, a solid
grasp of contemporary policy and institutional issues, analytical exposition and critical evaluation. It
should be well-structured and presented, making appropriate use of empirical evidence, graphs and
footnotes, and with full referencing of material used.

Word limit and count: Your essay must not contain more than 2,000 words. The word limit excludes
references/bibliography but includes everything else including footnotes, appendices etc. A word
count (available in Word) should be included at the beginning of the essay. You should hand
the essay in via ESOFT-LMS.

Plagiarism: This is a very serious offence, and can result in students being suspended for a
semester or longer.

Essay Topics

1. The Gravity Model of international trade is widely thought of as a “testing bed” on which to
assess the trade impacts of different trade-related policies. It is also seen as a model which
provides “some of the clearest and most robust findings in empirical economics”. Assess this
view and provide an informed critique of the Gravity model.

2. Explain the key features and implications of a Ricardian model of international trade. In your
answer make clear the model’s assumptions and outline how it provides an explanation for
trade. What are the theoretical and empirical shortcomings of the model?

3. What is meant by the ‘Specific Factors’ model of international trade and what light does it
throw on the distributional effects of international trade? Can this model explain why certain
types of labour are hostile to trade?

4. The Heckscher-Ohlin model has frequently been attacked on empirical grounds in Leontief’s
Paradox, Trefler’s missing trade and other studies. To what extent do theoretical reasoning and
empirical evidence now justify the main claims of the Heckscher-Ohlin model?
 Further readings

1. The Gravity Model of international trade is widely thought of as a “testing bed” on which to
assess the trade impacts of different trade-related policies. It is also seen as a model which
provides “some of the clearest and most robust findings in empirical economics”. Assess this
view and provide an informed critique of the Gravity model.

Greenaway, D. & Milner, C. (2003) , Regionalism and Gravity, Wiley Online Library, at:
https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-9485.00249

Shepherd, B., The Gravity Model of International Trade: A User Guide at:
www.unescap.org/resources/gravity-model-international-trade-user-guide

James E. Anderson (2016), The Gravity Model of Economic Interaction, Boston College and
NBER, at: https://www2.bc.edu/james-anderson/GravityModel.pdf

Carrothers, G.A.P. 1956. An Historical Review of the Gravity and Potential Concepts of Human
Interaction Journal of the American Institute of Planners 22: 94-102.

Kirby, H. 1970. Normalizing Factors of the Gravity Model: An Interpretation Transportation

2. Explain the key features and implications of a Ricardian model of international trade. In your
answer make clear the model’s assumptions and outline how it provides an explanation for
trade. What are the theoretical and empirical shortcomings of the model?

Leontief, W. W. (1953). "Domestic Production and Foreign Trade: The American Capital Position
Re-examined". Proceedings of the American Philosophical Society. 97: 332–349.

McKenzie, Lionel W. (1954). "Specialisation and Efficiency in World Production". Review of

Dornbusch, R.; Fischer, S.; Samuelson, P. A. (1977). "Comparative Advantage, Trade, and
Payments in a Ricardian Model with a Continuum of Goods". The American Economic Review.
67 (5): 823–839

Chipman, John S. (1965). "A Survey of the Theory of International Trade: Part 1, The Classical
Theory". Econometrica. 33 (3): 477–519 Section 1.8.

Dornbusch, R.; Fischer, S.; Samuelson, P. A. (1977). "Comparative Advantage, Trade, and
Payments in a Ricardian Model with a Continuum of Goods". The American Economic Review.
67 (5): 823–839
3. What is meant by the ‘Specific Factors’ model of international trade and what light does it
throw on the distributional effects of international trade? Can this model explain why certain
types of labour are hostile to trade?

Jones, R.W. & J.P. Neary 1984, “Positive Theroy of International Trade” in R.W. Jones and P.B.
Kenen, eds., Handbook of International Economics, Volume I, North Holland.

Stopler, W.F and P.A. Samuelson (1941), “ Protection and Real wages” Review of Economic
Studies, Volume IX 58/73

Rybczyynski, T.M (1995), “Factor endowment and relative commodity prices”, Economica.

4. The Heckscher-Ohlin model has frequently been attacked on empirical grounds in Leontief’s
Paradox, Trefler’s missing trade and other studies. To what extent do theoretical reasoning
and empirical evidence now justify the main claims of the Heckscher-Ohlin model?

Alan Deardorff. “Testing Trade Theories and Predicting Trade Flows,” in Ronald W. Jones and
Peter B. Kenen, eds. Handbook of International Economics. Vol. 1. Amsterdam: North-Holland,
1984. A survey of empirical evidence on trade theories, especially the factor-proportions
theory.

H Bowen, E Leamer & L Sveikauskas (1987) Multicountry, multifactor tests of the factor
abundance theory, American Economic Review 77, pp 791-809.

Ronald W. Jones and J. Peter Neary. “The Positive Theory of International Trade,” in Ronald
W.Jones and Peter B. Kenen, eds. Handbook of International Economics. Vol. 1.
Amsterdam:North-Holland, 1984. An up-to-date survey of many trade theories, including the
factor proportions theory.

Nishioka, S (2005) “An explanation of OECD Trade with Knowledge Capital and the HOV model.
at: http://www.colorado.edu/Economics/CEA/WPs-05/wp05-06/wp05-06.pdf

Panagariya, A. (2012): “The 4-quadrant diagram depicting the Heckscher-Ohlin model”, in