UNIVERSITY OF ZIMBABWE
DEPARTMENT OF ECONOMICS
ECD/ECON 203: International Trade Theory and Policy
Academic Year: 202/2023 Second Semester
Lecturer: Dr F. Hazvina
Office: Room 232, Commerce Building
Consultation Times:
COURSE OBJECTIVES
Many of the most interesting and from a policy standpoint, most important issues on the
agenda at present are open economy issues. This course uses the tools of economic theory
to equip the student to gain insight into these questions. The course will focus on
international trade and the gains from trade. It will consider inter alia: the determinants of
international trade; the effects of intervening in the free flow of goods and services and
the linkages between trade policy and economic development.
ASSESSMENT: The assessment will be in 2 forms:
 An end of Block examination which accounts for 50% of total marks.
 Tests and Assignments that will account for 50% of total marks
COURSE TEXTS
1 Appleyard, D.R., Fields, A.J. and Steven Cobb (2009), International Economics 7th
Edition, McGraw -Hill.
2 Krugman, Paul and Maurice Obstfeld (2010), International Economics: Theory and
Policy, 8th edition Pearson Education.
3 Salvatore, Dominick (2004), International Economics: Theory and Policy, 8TH
edition, Macmillan, New York.
4 Sodersten, B. and Reed, G.V. (1995), International Economics, Macmillan, London.
5 Pugel, Thomas (2006), International Economics, Irwin Books
Major Website Resources
(a) Joint World Bank and International Monetary Fund External Libraries (JOLIS)
http://jolis.wworldbankimflib.org/external.htm
(b) WEbEC WWW-Resources in Economics
http://wwhelsinki.fi/WebEc/WebEc.html
(c) Social Science Research Network eLibrary,
http://ww.ssrn.com/
PART 1
INTERNATIONAL TRADE THEORY
1 Perfect Competition Models of Trade I
1.1 The Mercantilists’ Views on Trade
1.2 Classical Theory of Absolute Advantage
1.3 Theory of Comparative advantage and gains from trade
1.4 The Standard Theory of International Trade
1.5 Empirical tests of the Ricardian model
2 Perfect Competition Models of Trade II- Neoclassical Models
2.1 Factor Endowments and the Heckscher-Ohlin Theory
2.2 Stolper-Samuelson Theorem
2.3 Rybczynski proposition
2.4 Factor price equalisation and Income Distribution
2.5 Empirical tests of the factor abundance model – The Leontief paradox
3 Imperfect Competition and International Trade
3.1 Product Cycle Hypothesis
3.2 Technology Gap Model
3.3 Competitive Theory of trade- Porter’s Diamond
3.4 Trade with monopolistic competition
3.5 Intra Industry Trade
3.6 Empirical tests on intra-industry trade.
PART II: INTERNATIONAL TRADE POLICY
4 Trade Policy Analysis
4.1 Motives of protection- Arguments for and against Protection
4.2 Instruments of trade policy
4.3 Tariffs and tariff costs
4.4 Effective protection
4.5 Other distortions to free trade (import quotas, export tax, subsidy etc)
4.6 Comparison of tariffs and NTBs
4.7 Offer curves and optimum tariff