Please note! Course description is confirmed for two academic years, which means that in general, e.g. Learning outcomes, assessment methods and key content stays unchanged. However, via course syllabus, it is possible to specify or change the course execution in each realization of the course, such as how the contact sessions are organized, assessment methods weighted or materials used.


The course introduces the students to international trade theory and applied (empirical) trade economics at the level required for applied economists. It also provides a basic foundation of knowledge in international trade theory for more advanced PhD level courses.

Credits: 6

Schedule: 08.01.2019 - 19.02.2019

Teacher in charge (valid 01.08.2020-31.07.2022): Juuso Välimäki

Teacher in charge (applies in this implementation): Svetlana Ledyaeva, Katariina Nilsson Hakkala

Contact information for the course (valid 21.11.2018-21.12.2112):

Katariina Nilsson-Hakkala,
Aalto University & ETLA,

Ledyaeva, Aalto University,


Tolga Benzer, Aalto,

Andrey Zhukov, Aalto,

CEFR level (applies in this implementation):

Language of instruction and studies (valid 01.08.2020-31.07.2022):

Teaching language: English

Languages of study attainment: English


  • Valid 01.08.2020-31.07.2022:

    This course studies the determinants and effects of international trade and investment. We start with the classical models of trade theory, including the Ricardian theory of comparative advantage and the Heckscher–Ohlin model. We then cover more modern trade models that incorporate economies of scale and imperfect competition. When presenting each theoretical model, we examine how they fare relative to the data, and contextualize them with specific empirical examples. In the last part of the course, we examine trade policy. We study the effects of different types of trade policies and ask what would be the optimal trade policies. Time permitting, we will also discuss the effects of the COVID-19 pandemic on international trade.


  • Applies in this implementation:

    Inter-industry Specialization, Comparative Advantage,
    and basic Trade Policy

    Lecture 1.

    Lecture 2. Comparative
    (Svetlana Ledyaeva)

    Lecture 3. Relative
    Factor Abundance: The Heckscher-Ohlin –Model (
    Svetlana Ledyaeva)

    Lecture 4. Trade
    Policy: Tariffs, Quotas and NTMs
    (Svetlana Ledyaeva)


    Intra-industry Specialization, Imperfect Competition
    and Strategic trade policy

    Lecture 5. Increasing
    Returns to Scale and Imperfect competition
    (Svetlana Ledyaeva)

    Lecture 6. Intra-industry
    trade and Gravity modelling
    (Svetlana Ledyaeva)

    Lecture 7.
    Strategic & applied trade policy
    (Katariina Nilsson Hakkala)

    Lecture 8. Firm
    heterogeneity and the Melitz model
    (Katariina Nilsson Hakkala)


    Multinational Firms, Foreign Direct Investment and
    Labour market impacts of trade

    Lecture 9. Multinational
    Firms and Fragmentation of Production
    (Katariina Nilsson Hakkala)

    Lecture 10.
    Offshoring and labor markets
    (Katariina Nilsson Hakkala)

    Lecture 11. Globalization
    and income inequality
    (Katariina Nilsson Hakkala)


Assessment Methods and Criteria
  • Valid 01.08.2020-31.07.2022:

    Examination, exercises, and class contribution.

  • Valid 01.08.2020-31.07.2022:

    In total 160h, consisting of lectures and exercises and independent work.


Study Material
  • Valid 01.08.2020-31.07.2022:

    Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International trade: theory & policy. Pearson Education Limited.

    Feenstra, R. C. (2015). Advanced international trade: theory and evidence. Princeton university press.

    Other readings assigned during the course.

  • Applies in this implementation:

    You are expected to read all chapters and articles allocated to each
    lecture before the lectures, thank you.

    Lecture notes will be published online after the lectures.

  • Valid 01.08.2020-31.07.2022:

    Two of the advanced Microeconomics courses (31E11000, 31E11100, 31E12000, 31E12100, 31E99906 and 31E13000)