●Introduction1What Is International Economics About?3The Gains from Trade4The Pattern of Trade5How ch Trade?5Balance of Payments6Exchange Rate Determination6International Policy Coordination7The International Capital Market8International Economics: Trade and Money8Part 1International trade theory10World Trade: An Overview10Who Trades with Whom?10Size Matters: The Gravity Model11Using the Gravity Model: Looking for Anomalies13Impediments to Trade: Distance, Barriers, and Borders14The Changing Pattern of World Trade16Has the World Gotten Smaller?16What Do We Trade?18Service Offshoring19Do Old Rules Still Apply?21Summary22Labor Productivity and Comparative Advantage:The Ricardian Model24The Concept of Comparative Advantage25A One-Factor Economy26Relative Prices and Supply28Trade in a One-Factor World29Determining the Relative Price after Trade30box: Comparative Advantage in Practice: The Case of Babe Ruth33The Gains from Trade34A Note on Relative Wages35box: The Losses from Nontrade36Misconceptions about Comparative Advantage37Productivity and Competitiveness37box: Do Wages Reflect Productivity?38The Pauper Labor Argument38Exploitation39Comparative Advantage with Many Goods40Setting Up the Model40vii Relative Wages and Specialization40Determining the Relative Wage in the ltigood Model42Adding Transport Costs and Nontraded Goods44Empirical Evidence on the Ricardian Model45Summary48Specific Factors and Income Distribution51The Specific Factors Model52box: What Is a Specific Factor?53Assumptions of the Model53Production sibilities54Prices, Wages, and Labor Allocation57Relative Prices and the Distribution of Income61International Trade in the Specific Factors Model63Income Distribution and the Gains from Trade64The Political Economy of Trade: A Preliminary View67Income Distribution and Trade Politics68case study: Trade and Unemployment68International Labor Mobility70case study: Wage Convergence in the Age of Mass Migration72case study: Immigration and the U.S. Economy73Summary76Appendix: Further Details on Specific Factors80Marginal and Total Product80Relative Prices and the Distribution of Income81Resources and Trade: The Heckscher-Ohlin Model84Model of a Two-Factor Economy85Prices and Production85Choosing the Mix of Inputs89Factor Prices and Goods Prices90Resources and Output92Effects of International Trade between Two-Factor Economies94Relative Prices and the Pattern of Trade94Trade and the Distribution of Income96case study: North-South Trade and Income Inequality97case study: Skill-Biased Technological Change and Income Inequality99Factor-Price Equalization102Empirical Evidence on the Heckscher-Ohlin Model103Trade in Goods as a Substitute for Trade in Factors: Factor Content of Trade104Patterns of Exports between Developed and Developing Countries107Implications of the Tests109Summary110Appendix: Factor Prices, Goods Prices, and Production Decisions114Choice of Technique114Goods Prices and Factor Prices115More on Resources and Output117The Standard Trade Model118A Standard Model of a Trading Economy119Production sibilities and Relative Supply119Relative Prices and Demand120 The Welfare Effect of Changes in the Terms of Trade123Determining Relative Prices124Economic Growth: A Shift of the RS curve124Growth and the Production sibility Frontier126World Relative Supply and the Terms of Trade126International Effects of Growth129case study: Has the Growth of Newly Industrializing CountriesHurt Advanced Nations?129Tariffs and Export Subsidies: Simultaneous Shifts in RS and RD132Relative Demand and Supply Effects of a Tariff132Effects of an Export Subsidy133Implications of Terms of Trade Effects: Who Gains and Who Loses?134International Borrowing and Lending135Intertemporal Production sibilities and Trade135The Real Interest Rate136Intertemporal Comparative Advantage138Summary138Appendix: More on Intertemporal Trade142External Economies of Scale and the InternationalLocation of Production145Economies of Scale and International Trade: An Overview146Economies of Scale and Market Structure147The Theory of External Economies148Specialized Suppliers148Labor Market Pooling149Knowledge Spillovers150External Economies and Market Equilibrium151External Economies and International Trade152External Economies, Output, and Prices152External Economies and the Pattern of Trade153box: Holding the World Together155Trade and Welfare with External Economies156Dynamic Increasing Returns157Interregional Trade and Economic Geography158box: Tinseltown Economics160Summary161Firms in the Global Economy: Export Decisions,Outsourcing, and ltinational Enterprises164The Theory of Imperfect Competition165Monopoly: A Brief Review166Monopolistic Competition168Monopolistic Competition and Trade173The Effects of Increased Market Size173Gains from an Integrated Market: A Numerical Example174The Significance of Intra-Industry Trade178case study: Intra-Industry Trade in Action: The North American Auto Pactof 1964 and the North American Free Trade Agreement (NAFTA)180Firm Responses to Trade: Winners, Losers, and Industry Performance181Performance Differences across Producers182The Effects of Increased Market Size184Trade Costs and Export Decisions185 Dumping188case study: Antidumping as Protectionism189 ltinationals and Outsourcing190case study: Patterns of Foreign Direct Investment Flows Around the World190The Firm’s Decision Regarding Foreign Direct Investment194Outsourcing195case study: Shipping Jobs Overseas? Offshoring and Unemploymentin the United States197Consequences of ltinationals and Foreign Outsourcing199Summary200Appendix: Determining Marginal Revenue205Part 2International trade Policy206The Instruments of Trade Policy206Basic Tariff Analysis206Supply, Demand, and Trade in a Single Industry207Effects of a Tariff209Measuring the Amount of Protection210Costs and Benefits of a Tariff212Consumer and Producer Surplus212Measuring the Costs and Benefits214box: Tariffs for the Long Haul216Other Instruments of Trade Policy217Export Subsidies: Theory217case study: Europe’s Common Agricultural Policy218Import Quotas: Theory220case study: An Import Quota in Practice: U.S. Sugar221Voluntary Export Restraints224case study: A Voluntary Export Restraint in Practice224Local Content Requirements225box: Bridging the Gap226Other Trade Policy Instruments227The Effects of Trade Policy: A Summary227Summary228Appendix: Tariffs and Import Quotas in the Presence of Monopoly232The Model with Free Trade232The Model with a Tariff233The Model with an Import Quota234Comparing a Tariff and a Quota234The Political Economy of Trade Policy236The Case for Free Trade237Free Trade and Efficiency237Additional Gains from Free Trade238Rent Seeking239Political Argument for Free Trade239case study: The Gains from 1992240National Welfare Arguments against Free Trade242The Terms of Trade Argument for a Tariff242 The Domestic Market Failure Argument against Free Trade243How Convincing Is the Market Failure Argument?245Income Distribution and Trade Policy246Electoral Competition247Collective Action248box: Politicians for Sale: Evidence from the 1990s249Modeling the Political Process250Who Gets Protected?250International Negotiations and Trade Policy252The Advantages of Negotiation253International Trade Agreements: A Brief History254The Uruguay Round256Trade Liberalization256Administrative Reforms: From the GATT to the WTO257Benefits and Costs258box: Settling a Dispute—and Creating One259case study: Testing the WTO’s Metal260The Doha Disappointment261box: Do Agricultural Subsidies Hurt the Third World?262Preferential Trading Agreements263box: Free Trade Area versus Customs Union265box: Do Trade Preferences Have Appeal?266case study: Trade Diversion in South America267Summary268Appendix: Proving that the Optimum Tariff Is itive272Demand and Supply272The Tariff and Prices272The Tariff and Domestic Welfare273Trade Policy in Developing Countries275Import-Substituting Industrialization276The Infant Industry Argument277Promoting Manufacturing Through Protection278case study: Mexico Abandons Import-Substituting Industrialization280Results of Favoring Manufacturing: Problems of Import-Substituting Industrialization281Trade Liberalization since 1985282Trade and Growth: Takeoff in Asia284box: India’s Boom287Summary287Controversies in Trade Policy290Sophisticated Arguments for Activist Trade Policy291Technology and Externalities291Imperfect Competition and Strategic Trade Policy293box: A Warning from Intel’s Founder296case study: When the Chips Were Up297Globalization and Low-Wage Labor299The Anti-Globalization Movement299Trade and Wages Revisited300Labor Standards and Trade Negotiations302Environmental and Cultural Issues303The WTO and National Independence303 case study: A Tragedy in Bangladesh304Globalization and the Environment305Globalization, Growth, and Pollution306The Problem of “Pollution Havens”307The Carbon Tariff Dispute309Summary310Mathematical tscripts313 tscript to Chapter 5: The Factor-Proportions Model313Factor Prices and Costs313Goods Prices and Factor Prices315Factor Supplies and Outputs316 tscript to Chapter 6: The Trading World Economy317Supply, Demand, and Equilibrium317Supply, Demand, and the Stability of Equilibrium319Effects of Changes in Supply and Demand321Economic Growth321A Transfer of Income322A Tariff323 tscript to Chapter 8: The Monopolistic Competition Model325ONLINE APPENDICES (www.pearsonhighered.com/krugman)Appendix A to Chapter 6: International Transfers of Income and the Terms of TradeThe Transfer ProblemEffects of a Transfer on the Terms of TradePresumptions about the Terms of Trade Effects of TransfersAppendix B to Chapter 6: Representing International Equilibrium with Offer CurvesDeriving a Country’s Offer Curve International EquilibriumAppendix A to Chapter 9: Tariff Analysis in General EquilibriumA Tariff in a Small Country A Tariff in a Large Country
