International Economics

495 Pages·2021·10.773 MB·English

by  James Gerber

This is a special edition of an established title widely used by colleges and
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James Gerber’s International Economics offers an introduction to both macro and micro I
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components of international economics. Using real-life applications and examples, the text
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makes economic theory and policy accessible to diverse groups of students, including those
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pursuing economics specialization as well as non-specialization courses. This equips students
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with an understanding of the entire spectrum of international economics without requiring a
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the use of higher-level mathematics. In addition, the text has a flexible approach, which
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includes self-contained chapters and comprehensive coverage, allowing instructors to adapt
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its concepts to a wide range of syllabi.
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New To This Edition E
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• New – Chapter 4 now incorporates a comprehensive discussion of the gravity model of
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trade. This discussion finds it as the most accurate one for predicting trade flows between
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countries. o
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• New – Five new case studies, including ones on the collapse of Thailand’s currency in
1997–1998 and Brexit, highlight and build on core concepts and help students see theories i
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in action. s
• New and Updated – Topics on the latest key economic trends and events, including the
role of economic institutions, the analysis of international economic policies, and the recent
history of the world economy, supplement economic theory with real-world applications. EE
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Available separately for purchase is MyLab Economics for International Economics, the teaching IOT
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JAMES GERBER
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International Economics
James Gerber
San Diego State University
E I G H T H E D I T I O N
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Tokyo • Seoul • Taipei • New Delhi • Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan
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Authorized adaptation from the United States edition, entitled International Economics, 8th Edition,
ISBN 978-0-13-689241-0 by James Gerber, published by Pearson Education © 2022.

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British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library

ISBN 10: 1-292-43399-X
ISBN 13: 978-1-292-43399-8
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BRIEF CONTENTS
Preface 13
PART 1 Introduction and Institutions 23
Chapter 1 An Introduction to the World Economy 24
Chapter 2 International Economic Institutions Since World War II 40
PART 2 International Trade 63
Chapter 3 Comparative Advantage and the Gains from Trade 64
Chapter 4 Comparative Advantage and Factor Endowments 87
Chapter 5 Beyond Comparative Advantage 117
Chapter 6 The Theory of Tariffs and Quotas 139
Chapter 7 Commercial Policy 161
Chapter 8 International Trade and Labor and Environmental Standards 181
PART 3 International Finance 205
Chapter 9 Trade and the Balance of Payments 206
Chapter 10 Exchange Rates and Exchange Rate Systems 236
Chapter 11 An Introduction to Open Economy Macroeconomics 272
Chapter 12 International Financial Crises 298
PART 4 Regional Issues in the Global Economy 327
Chapter 13 The United States in the World Economy 328
Chapter 14 The European Union: Many Markets into One 353
Chapter 15 Trade and Policy Reform in Latin America 382
Chapter 16 Export-Oriented Growth in East Asia 409
Chapter 17 China and India in the World Economy 438
Glossary 464
Index 475
Suggested Readings are available at www.pearson.com/uk/
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CONTENTS
Preface 13 Capital Flows and the Debt of
Developing Countries (Chapters 2,
PART 1 Introduction and 9, and 12) 36
Latin America and the World
Institutions 23
Economy (Chapter 15) 36
Export-Led Growth in East Asia
Chapter 1 An Introduction to the (Chapter 16) 37
World Economy 24 China and India in the World
Introduction: International Economic Economy (Chapter 17) 37
Integration 24 What Do International Economists Do? 37
Elements of International Economic Vocabulary 38 • Review Questions 38
Integration 25
Chapter 2 International Economic
The Growth of World Trade 26
Institutions Since
Capital and Labor Mobility 28
World War II 40
Features of Contemporary
International Economic Relations 30 Introduction: International Institutions
Trade and Economic Growth 32 and Issues Since World War II 40
International Institutions 40
Twelve Themes in International
A Taxonomy of International
Economics 33
Economic Institutions 41
The Gains from Trade and New Trade
Theory (Chapters 3, 4, and 5) 33 The IMF, the World Bank,
Wages, Jobs, and Protection and the WTO 41
(Chapters 3, 6, 7, and 8) 34 The IMF and World Bank 41
Trade Deficits (Chapters 9, 11, and 12) 34 The GATT, the Uruguay Round,
Regional Trade Agreements and the WTO 43
(Chapters 2, 13, and 14) 34 CASE STUDY: The GATT Rounds 45
The Resolution of Trade Conflicts Regional Trade Agreements 46
(Chapters 2, 7, and 8) 35 Five Types of Regional Trade
The Role of International Institutions Agreements 47
(Chapters 2, 8, and 12) 35 CASE STUDY: Prominent Regional
Exchange Rates and the Macroeconomy Trade Agreements 47
(Chapters 10 and 11) 35 Regional Trade Agreements and
Financial Crises and Global Contagion the WTO 49
(Chapter 12) 36 For and Against RTAs 50
6
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Contents 7
The Role of International Economic CASE STUDY: Changing Comparative
Institutions 51 Advantage in the Republic of
The Definition of Public Goods 52 Korea,  1960–2010 77
Maintaining Order and Reducing Comparative Advantage and
Uncertainty 53 “Competitiveness” 79
CASE STUDY: Bretton Woods 54
Economic Restructuring 80
Criticism of International Institutions 56 CASE STUDY: Losing Comparative
Sovereignty and Transparency 56 Advantage 82
Ideology 57
Summary 84 • Vocabulary 85 •
Implementation and Adjustment Review Questions 85
Costs 58
CASE STUDY: China’s Alternative to the Chapter 4 Comparative Advantage
IMF and World Bank: The AIIB 59 and Factor Endowments 87
Summary 60 • Vocabulary 61 • Introduction: The Determinants of
Review Questions 61 Comparative Advantage 87
Modern Trade Theory 88
PART 2 International The HO Trade Model 88
Gains from Trade in the HO Model 89
Trade 63
Trade and Income Distribution 92
The Stolper-Samuelson Theorem 93
Chapter 3 Comparative Advantage
The Specific Factors Model 95
and the Gains from Trade 64
CASE STUDY: Comparative Advantage
Introduction: The Gains from Trade 64 in a Single Natural Resource 97
Adam Smith and the Attack on Empirical Tests of the Theory of
Economic Nationalism 64 Comparative Advantage 98
A Simple Model of Production
Extensions of the HO Model 99
and Trade 66
The Gravity Model 100
Absolute Productivity Advantage
The Product Cycle 100
and the Gains from Trade 66
CASE STUDY: United States–China
CASE STUDY: Gains from Trade in Trade 102
Nineteenth-Century Japan 68 Foreign Trade Versus Foreign
Comparative Productivity Advantage Investment 103
and the Gains from Trade 69 Off-Shoring and Outsourcing 105
The Production Possibilities Curve 70 CASE STUDY: Mexico’s Participation
Relative Prices 71 in Global Value Chains 107
The Consumption Possibilities Curve 71 The Impact of Trade on Wages and Jobs 108
The Gains from Trade 72 CASE STUDY: Do Trade Statistics Give a
Domestic Prices and the Trade Price 74 Distorted Picture of Trade Relations?
Absolute and Comparative Productivity The Case of the iPhone 3G 110
Advantage Contrasted 75 Migration and Trade 111
Gains from Trade with No Absolute Summary 113 • Vocabulary 114 •
Advantage 76 Review Questions 115
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8 Contents
Chapter 5 Beyond Comparative Analysis of Quotas 152
Advantage 117 Types of Quotas 153
The Effect on the Profits of Foreign
Introduction: More Reasons to Trade 117
Producers 153
Intraindustry Trade 118
Hidden Forms of Protection 155
Characteristics of Intraindustry Trade 119
CASE STUDY: Intellectual Property
The Gains from Intraindustry Trade 121
Rights and Trade 156
CASE STUDY: United States
and Canada Trade 123 Summary 158 • Vocabulary 159 •
Review Questions 159
Trade and Geography 124
Geography, Transportation Costs, and CHAPTER 7 Commercial Policy 161
Internal Economics of Scale 124
Introduction: Commercial Policy,
CASE STUDY: The Shifting Geography
Tariffs, and Arguments for
of Mexico’s Manufacturing 125
Protection 161
External Economies of Scale 126
Trade and External Economies 127 Tariff Rates in The World’s Major
Traders 162
Industrial Policy 128
Industrial Policies and Market The Costs of Protectionism 164
Failure 129 The Logic of Collective Action 165
Industrial Policy Tools 131 CASE STUDY: Agricultural Subsidies 166
CASE STUDY: Clean Energy Why Nations Protect Their Industries 168
and Industrial Policy 132 Revenue 168
Problems with Industrial Policies 133 The Labor Argument 169
CASE STUDY: Do WTO Rules Prohibit The Infant Industry Argument 170
Industrial Policies? 134 The National Security Argument 170
The Cultural Protection Argument 171
Summary 136 • Vocabulary 137 •
Review Questions 137 The Retaliation Argument 172
CASE STUDY: National Security
Chapter 6 The Theory of Tariffs Protection and the WTO 172
and Quotas 139 The Politics of Protection in the
Introduction: Tariffs and Quotas 139 United States 174
Analysis of a Tariff 139 Antidumping Duties 174
Consumer and Producer Surplus 140 Countervailing Duties 176
Prices, Output, and Consumption 141 Escape Clause Relief 176
Resource Allocation and Income Section 301 177
Distribution 143 National Security Protection 177
CASE STUDY: A Comparison of CASE STUDY: Economic Sanctions 177
Tariff Rates 145 Summary 179 • Vocabulary 180 •
Other Potential Costs 147 Review Questions 180
The Large Country Case 148
CHAPTER 8 International Trade and
Effective Versus Nominal Rates
Labor and Environmental
of Protection 149
Standards 181
CASE STUDY: The Uruguay
and Doha Rounds 151 Introduction: Income and Standards 181
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Contents 9
Setting Standards: Harmonization, Are Current Account Deficits
Mutual Recognition, or Separate? 182 Harmful? 224
Labor Standards 184 CASE STUDY: Current Account
Deficits in the United States 225
Defining Labor Standards 184
CASE STUDY: Child Labor 185 International Debt 227
Labor Standards and Trade 188 CASE STUDY: Odious Debt 228
Evidence on Low Standards as a The International Investment Position 230
Predatory Practice 189
Summary 231 • Vocabulary 232 •
CASE STUDY: The International
Review Questions 232
Labour Organization 190
Appendix A:
Trade and the Environment 192
Measuring the International
Transboundary and Nontransboundary
Investment Position 233
Effects 192
Appendix B:
CASE STUDY: Trade Barriers and
Balance of Payments Data 234
Endangered Species 194
Bureau of Economic Analysis 234
Alternatives to Trade Measures 195
International Financial Statistics 234
Labels for Exports 196
Balance of Payments Statistics 235
Requiring Home Country Standards 197
Appendix C:
Increasing International Negotiations 198
A Note on Numbers 235
CASE STUDY: Global Climate Change 199
Summary 201 • Vocabulary 202 • Chapter 10 Exchange Rates and
Review Questions 202
Exchange Rate
Systems 236
PART 3 International
Introduction: Fixed, Flexible, or
Finance 205 In Between? 236
Exchange Rates and Currency Trading 237
Chapter 9 Trade and the Balance Reasons for Holding Foreign
of Payments 206 Currencies 238
Introduction: The Current Account 206 Institutions 239
The Trade Balance 207 Exchange Rate Risk 240
The Current and Capital Account The Supply and Demand for Foreign
Balances 207 Exchange 241
Introduction to the Financial Account 210 Supply and Demand with Flexible
Types of Financial Flows 210 Exchange Rates 241
Limits on Financial Flows 216 Exchange Rates in the Long Run 242
CASE STUDY: The Crisis of 2007–2009 Exchange Rates in the Medium
and the Balance of Payments 217 Run and Short Run 246
CASE STUDY: The Largest Market
The Current Account and the
in the World 250
Macroeconomy 218
Fixed Exchange Rates 252
The National Income and Product
Accounts 219 CASE STUDY: The End of the Bretton
National Savings and Current Woods System 256
Account Balances 222 The Real Exchange Rate 258
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