International industrial policy (2017/2018)

Course code
4S003748
Name of lecturer
Angelo Zago
Coordinator
Angelo Zago
Number of ECTS credits allocated
9
Academic sector
SECS-P/02 - ECONOMIC POLICY
Language of instruction
English
Period
Primo Semestre Magistrali dal Oct 2, 2017 al Dec 22, 2017.

Lesson timetable

Go to lesson schedule

Learning outcomes

Departing from traditional theory of international trade based on comparative advantage, in this course we focus on theories of trade based on the firm. Globalization has substantially changed the world economy and the nature of firms. There has been an increase in Foreign Direct Investments (FDI). Sub-contracting abroad in now a common practice. A third of total trade is intrafirm. Therefore, by acknowledging that firms - not countries - are involved in trade, recent developments have investigated the decisions to export and invest abroad at the firm level.

Syllabus

In this course we will cover the main models that consider the firms' decisions to export and/or invest abroad; we will discuss how trade choices may affect (and are affected by) the organizational form of firms; we will discuss the evolution of global value chains and the main flows of trade in goods and services. While the focus is on general trends and phenomena, we will also touch on the problems of Italian small and medium enterprises (SMEs) competing in global markets.
- Principal-Agent Model: Optimal risk-sharing, trade-off risk and incentives, monitoring.
- Hierarchies: Piece-rate versus fixed contracts.
 Sorting and incentive effects of incentive contracts. The role of supervisor. The screening mechanism.
 Efficiency wages. Deferred payments or bond-posting. Incentive effects of promotions inside the firm and the rank-order tournament.
- Theory of the firm: Coase, Williamson and the transaction cost theory of the firm. Property rights and the theory of the firm.
The Grossman-Hart model.
Incomplete contracts, specific investments, ownership of the firm.
- Heterogeneous firms and the decision to export. Melitz model. Effects of trade liberalization and reallocation effects.
- Firms and the decision to invest in Foreign Direct Investments. Horizontal FDI.
The Brainard model. Horizontal FDI and heterogenous firms (Yeaple, Melitz and Helpman 2003).

Vertical FDI and country price differences (Helpmand 1984).
- Outsourcing and internazionalization. Monopolistic competition, increasing returns, incomplete contracts (Antràs 2003). Outsourcing and product cycles (Antràs 2004).
Incomplete contracts and heterogeneous firms (Antràs & Helpman 2003).

Reference books
Author Title Publisher Year ISBN Note
RICKETTS M. The Economics of Business Enterprise. An Introduction to Economic Organization and the Theory of the Firm Edward Elgar  

Assessment methods and criteria

The content and the examination procedures are the same for students attending and not the course. Consistently with the content of lectures, the examination for the course of International Industrial Policy includes:
I) a WRITTEN EXAM, in which students are asked to:
a) answer some open questions of trade theory and discuss a case, e.g., to comment critically current economic facts related to the course provided during the exam;
b) answer some theory questions in a multiple choice format.
These two parts together determine the grade for the written exam.
II) In addition, students are required to prepare an ESSAY, on a topic chosen by the student, developing an article of about 2000 words that must be handed in at the exam date (printed in front and in the back of white A4 paper, single-spaced, stapled without covers). The essay can be prepared in group, in groups of 3-4 students maximum, where each student has to prepare about 2000 words. The essay may be a critical review of a scientific article; the investigation of a phenomenon through the analysis of data; a discussion of a relevant case-study.
III) Finally, during the course students are given the opportunity to prepare a group presentation (with about 4 students per group).
For the overall grade, therefore, one can add the following BONUS to the written exam:
i) Essay - mandatory. Its assessment is done on a 0-30 scale: if insufficient (<18/30), points -1; if 18-20/30, 0 points; if 21-23/30, 1 point; if 24-26/30, 2 points; if 27-30/30, 3 points.
ii) Presentation - for attending students. It entitles to 0-2 points.
In summary, the FINAL VOTE therefore includes:
1. the grade obtained in the written exam,
2. a possible bonus for the mandatory essay,
3. a possible bonus for the group ppresentation.

All bonuses are valid for the four exam sessions of the academic year 2017-18, that is, until the Autumn 2018 session included.

Student opinions - 2016/2017