Business, Government and the Global Economy
(IB/EC320)
Prof. Carsten Krabbe Nielsen
COURSE DESCRIPTION
In most countries there are no restrictions on trade (or movement of capital and labor) between cities (think
about Milan and Rome) or between states (California and Texas, say). In fact, it is considered beneficial to
the country that people and businesses specialize in some sort of economic activity and then trade the
produced goods with each others. The same is not the case for trade (and movement of labor and capital)
between countries, which is often restricted and viewed with suspicion by many people. Is there anything
real to this difference? The response to this question would by most economists be a "no", possibly qualified,
and they would argue in favor of increasing trade and other types of economic interaction between nations.
The Two Perspectives. In this course we shall look at international economic interaction from two
perspectives, that of the nation (government) and that of the rm. The government, at least in principle, has as
goal the (economic) welfare of its citizens while the firm is primarily concerned with its economic returns.
Trade, Foreign Investments, and Labor Movements. We shall seek to understand the nature of economic
interaction between countries, why it takes place and who benefits from it. This will also help us understand
the working and consequences of various trade policy instruments, like tariffs and institutions, including
FTA's (Free Trade Agreements) and similar international arrangements.
The Firm Abroad. Moving next to the point of view of the firm, we shall provide a list of reasons why a
company may want to do business abroad, f.i. by selling and/or producing in other 1countries. Phenomena
like outsourcing and multinational cooperations will have our particular attention.
The Cultural/Political Impact of Globalization. Finally, time permitting, we shall step back and look at
globalization in a broader context. This process of integrating the world, economically, culturally and
politically, presents new challenges and opportunities for people everywhere. By knowing more about this
process, it may be easier to strengthen its positive aspects.
PREREQUISITES
Understanding international economics and business practices is useful for those who want to specialize in
economics and international business economics as well as those who are interested in international affairs,
the politics and culture of globalization and international conflicts. It is highly recommended that you have
taken an introductory course in economics when enrolling in this class.
COURSE OBJECTIVES
After successful completion of the course you should understand the fundamental economic models of trade
(including the concepts of comparative advantage and the idea of winners and losers from trade) as well as
some of the types of restrictions on trade that countries may impose. You should be familiar with some of the
important international organization that help shape the interaction between countries of the world. You
should also have a good understanding of the challenges and opportunities that globalization present to
business cooperation (both internally and externally) and how the ongoing internationalization of markets has
spurred the creation of new types of organization of production and of decision making within the firm. Finally
you should be able to better assess the various arguments in favor of and against globalization, in particular
you should be able to put them into the context of the economic models we have studied in this course.
METHOD OF TEACHING
Lecture, group work and in-class discussion
CREDITS
3 US / 6 ECTS credits
GRADING
You are asked to form groups of size 2 to 4. These groups are supposed to hand in weekly assignments as
well as a final report.
I (25 %) WEEKLY ASSIGNMENTS
Almost every week your group is asked to find an article from a newspaper, a magazine or the internet that
illustrates a topic that we have been going over in class the week before. You are asked to provide a brief
written comment (between a half and one page, typewritten). This comment shall: (i) State which issue(s) or
topic(s) that were covered in class the article relates to. (ii) Describe what the article says and how it
illustrates the issues/topics. (iii) Include your own comments. The deadline is Wednesday of the week. Every
week (on the day you hand in the assignment), I will ask two or three students to briefly go over the chosen
Detailed syllabi will be submitted upon beginning of class or upon request
(send to [email protected])
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Business, Government and the Global Economy
(IB/EC320)
Prof. Carsten Krabbe Nielsen
article and their comments on it in class. The grade for this part will accrue equally to all members of the
group.
II (20 %) MIDTERM EXAM
This 1 hour, written closed book exam consists of 15 multiple choice questions, asking you to provide
definitions and basic ideas that were presented in class, as well as one essay question
III (25 %) REPORT
Each group is asked to write a report on a foreign firm located in Italy (or in Europe). Ideally this would be a
firm from your home country. You are asked to examine the presence of this firm in light of the theory we
have gone over in class. In particular, you should explain its motive for being represented abroad, its
strategies for expanding abroad, the challenges it faces in a foreign environment, its role in the international
specialization of production and how its presence abroad has affected the home and host countries. Your
report could be based entirely on written sources, but it would be ideal if you are able to get information
directly from the firm. The size of the report is 10 to 15 typewritten pages. At the end of the term each group
is asked to present its conclusions to the rest of the class. More information about the requirements for the
report will be made available in a separate handout. The grade for this part will accrue equally to all
members of the group.
IV (30 %) FINAL EXAM
This written, closed book exam is 1and 1/2 hour long and consists of 15 multiple choice questions, asking
you to provide definitions and basic ideas that were presented in class, as well as two essay questions.
COURSE READINGS AND MATERIALS
Books:
Chang, Ha-Joon(2005): Kicking away the Ladder; Development Strategy in Historical Perspective, Anthem
Press, London. ISBN 1-84331-027-9.
Krugman, P. and M. Obstfeld (KO): International Economics; Theory and Policy, International Edition (8'th
edition). Prentice Hall. ISBN: 978-0-321-488831.
Wild, J.J., K.L. Wild and J.C.Y. Han (WWH): International Business; The Challenges of Globalization (5'th
edition). Prentice Hall. ISBN-10: 0137153759.
Articles:
Antras, P: Lecture Notes on Multinational firms and global production. 2006.
Bhagwati, J, A.(2007): Why multinationals help reduce poverty. The World Economy. 211-228.
Feenstra, R.(1998): Integration of trade and disintegration of production in the global economy. Journal of
Economic Perspectives 12, 31-50
Neary, J.P.: Foreign direct investments: the OLI framework. Oxford University Tokarick, S.(2008): Dispelling
some misconceptions about agricultural free trade liberalization. Journal of Economic Perspectives, 22, 199216.
BIO OF INSTRUCTOR
Carsten Krabbe Nielsen is currently Associate Professor at Università Cattolica del Sacro Cuore
(Economics Department); he gained a MA Economics, U. Copenhagen (1989); MS Statistics, Stanford
(1992); Ph.D. Economics, Stanford (1994); BA Philosophy and Mathematics U. Copenhagen (1997)
E-MAIL ADDRESS
[email protected]
Detailed syllabi will be submitted upon beginning of class or upon request
(send to [email protected])
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