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Final Exam

The final exam is scheduled for Wednesday April 10 at noon in BUCH B307. This is a 2-hour exam. The final exam will consists of a five short-answer essay-style questions. You will need to answer four of the five questions and drop the question you like the least. Each question will have four to six parts with detailed points. Please carefully review the study questions below in preparation for the exam.


STUDY QUESTIONS
last updated April 9, 2009
2013 update forthcoming
  1. Develop an understanding of key empirical facts. What is Canada's profile of international trade and foreign investment? Who are the major trading partners? What is the composition of trade? How has this changed over the last few decades? In which industries does Canada have a revealed comparative advantage? What is the empirical magnitude of intra-industry trade relative to inter-industry trade between industrialized countries?

  2. The basic empirical approach to testing Heckscher-Ohlin does not support the theory. (a) Explain why the early tests of H-O failed. (b) What modifications need to be made in order to improve the model's fit with reality?

  3. Does trade liberalization incrase child labour in poor countries? Identify and analyze the two competing effects through which trade liberalization affects the supply of child labour?

  4. Highly educated workers' relative wages have risen at the same time as their supply. (a) Does this implicate skill-biased technical change or trade as the likely cause? (b) What data can be used to discriminate between the hypotheses?

  5. How is the gravity equation used by trade economists similar to the equation from physics, and how is it different? How has the gravity equation evolved into its modern Anderson & van Wincoop specification, and what are the problems estimating this specification?

  6. Do national borders matter because of tariffs, exchange rate volatility, linguistics differences, or something else? (a) What are the conceptual groups of differences that create a border effect? (b) What does the empirical evidence tell us about the relative magnitude of the contributing elements to the border effect?

  7. Free trade areas may lead to trade creation (a positive effect) and trade diversion (a negative effect). What is the empirical evidence on both, in particular in light of the experience with NAFTA, as reported by Clausing?

  8. When analyzing the effect of trade liberalization on the environment, why did early studies fail to find solid evidence of the pollution haven effect? Through which empirical strategy has recent work been able to identify competing pollution haven and factor endowment effects?

  9. The Melitz model introduced the notions of the "intensive margin" and "extensive margin" into the international trade literature. Define these terms, and describe their empirical relevance. What is the economic intuition behind the Melitz model? What is the role of variable trade costs and fixed trade costs in the Melitz model? How does Chaney (2008) connect the Melitz model to the "gravity model", and what new parameters seem to matter? What do Crozet and Koenig (2010) find at the industry level?

  10. The New Economic Geography is rooted in a dynamic model of agglomeration and migration (of labour or capital) that divides regions into core and periphery. A key testable implication of this class of models is the Home Market Effect. What is the evidence on the Home Market Effect? Which identification strategies have been pursued? Is the Home Market Effect pervasive across countries and industries?

  11. A key question about exporter performance is whether becoming an exporter increases productivity, or whether being a high-productivity firm makes it more likely that this firm turns into an exporter. What does the empirical evidence tell us about this chicken-and-egg problem?

  12. Trade liberalization may affect firm performance by raising productivity across industries. What do theoretical models predict in regard to the effect of tariff reductions on the size of plants and the entry/exit of firms? Which model(s) best explain what we observe in reality? What does the evidence tell us about which firms are most likely to exit in the wake of trade liberalization?

  13. Are exports and FDI complements or substitutes? Connect the theory of multinational enterprises to the empirical evidence. What key variable explains why FDI often leads to increases in exports (i.e., complementarity)?

  14. Should domestic firms welcome the presence of multinationals? Does the evidence suggest positive or negative effects? How can the theory explain these results?



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