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
last updated April 9, 2009
2013 update forthcoming
- 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
- The basic empirical approach to testing Heckscher-Ohlin does not support
(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
- 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?
- Highly educated workers' relative wages have risen at the same time as
(a) Does this implicate skill-biased technical change or trade as the likely
(b) What data can be used to discriminate between the hypotheses?
- 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?
- 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?
- 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?
- 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?
- 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
- 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?
- 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?
- 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?
- 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)?
- Should domestic firms welcome the presence of multinationals? Does the
evidence suggest positive or negative effects? How can the theory explain