POLI 442 Midterm

Question 1

consumption indifference curve

Answer 1

a graphical representation showing the combinations of two goods where a consumer experiences the same level of satisfaction

Question 2

slope of indifference curve

Answer 2

tells us the marginal rate of substitution

Question 3

marginal rate of substitution

Answer 3

the rate where a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility

Question 4

production possibility frontier

Answer 4

a graphical representation that shows the maximum combinations of two goods that can be produced using available resources

Question 5

marginal rate of transformation

Answer 5

the rate at which one good must be sacrificed to produce an additional unit of another good

Question 6

slope of PPF

Answer 6

equal to the marginal rate of transformation

Question 7

comparative advantage

Answer 7

whatever product someone produces most efficiently compared to other products they can produce, what you can produce for a lower opportunity cost

Question 8

absolute advantage

Answer 8

the ability to produce more of a given product than the other country for the same input of resources

Question 9

opportunity cost

Answer 9

the potential forgone profit from a missed opportunity, the result of choosing to produce one product over another

Question 10

utility

Answer 10

the amount of user satisfaction you get out of something, how happy you are

Question 11

Heckscher-Ohlin Model

Answer 11

• intersectional factor mobility: high
• countries vary by: (relative) factor endowments
• with trade: countries export good that intensively use the well endowed factor
• winner: owner of abundant factor
• loser: owner of scarce factor

Question 12

factor of production

Answer 12

resources to produce goods

Question 13

sector of production

Answer 13

production of different types of goods

Question 14

capital factor of production

Answer 14

high skill labor

Question 15

labor factor of production

Answer 15

low skill labor

Question 16

Stolper-Samuelson Theorem

Answer 16

goes along with Heckscher-Ohlin, when all factors are mobile across sectors, an increase in the price of a good will increase the real earnings of the factor used intensively in the production of the good, and decrease the real earnings of the other factor

Question 17

Ricardo-Viner Model

Answer 17

• intersectional factor mobility: low
• countries vary by: technologies of production
• with trade: countries export good in which it has comparative advantage
• winner: owner of factor specific to export industry
• loser: owner of factor specific to import-competing industry

Question 18

median voter theorem

Answer 18

if members of a group have single peaked preferences, then the ideal point of median voter will be the winner

Question 19

Walter’s compensation hypothesis

Answer 19

losers of globalization are more likely to express feelings of economic insecurity which leads them to demand for compensation and prefer left parties because of the social welfare programs that the left promotes

Question 20

Colantone and Stanig: Threats to compensation

Answer 20

individuals in regions more exposed to Chinese import competition are more likely to vote for radical right parties because rising globalization being linked to support for left wing parties only works if the left can actually provide the welfare programs

Question 21

globalization paradox

Answer 21

at the exact moment that more (low-skilled) workers would demand greater labor market protection from government, countries are increasingly unable to afford these forms of employment insurance

Question 22

compensation hypothesis headline

Answer 22

they would rather vote for parties proposing limitations to free trade, even if bundled with a reduction of the welfare state

Question 23

Colantone and Stanig: Brexit

Answer 23

similarly to studying the political scale, they found that regions of the UK who were more exposed to China stock were more likely to vote for Brexit

Question 24

unidimensional views on globalization

Answer 24

IPE researchers have found that arguments on globalization correlate to other single policy areas. For example, if you dislike more trade, you also dislike more immigration and investment and so on.

Question 25

Social identity and preference for conformity - Ballard-Rosa

Answer 25

Individuals have a sense of group identity that's important to them that is affected by labor market success, these effects are most pronounced for members of a historically dominant majority group. When their social identity is failing, they argue that some individuals may respond to declines in own standing with greater preference for punishment of non-conformists (authoritarian values)

Question 26

Individuals with authoritarian values

Answer 26

Tend to share common political preferences: strongly opposed to out-groups, strongly value in-group authority/sovereignty

Question 27

2016 election and authoritarianism

Answer 27

Recent work in American politics suggests that individuals with more authoritarian values were more likely to vote for trump in 2016. Also found a robust effect of Chinese import competition on authoritarian values among white Americans, particularly those in diverse regions. The opposite is true for individuals not exposed to the China shock in diverse regions. There was no effect of import shock on non-white Americans.

Question 28

strategic trade policies and national security

Answer 28

international economic policies can be used as a policy instrument for other policy objectives: security policies

Question 29

positive inducement

Answer 29

trade as a reward, preferential trade agreements or free trade areas can be used to promote peace and or strengthen allies

Question 30

punishment

Answer 30

adversary states can be punished via limitations on trade (e.g. economic sanctions)

Question 31

Gowa and Mansfield: Trade as a reward

Answer 31

trade has security externalities, free trade benefits both states and can strengthen security capability by making them richer. they further argue that the alliance effect is more likely to be observe in bipolar international security context than multipolar context

Question 32

GATT - what is it

Answer 32

general agreement on tariff and trade in the wake of WWII to reduce trade barriers and promote international trade and ended up serving as the basis of trade cooperation for nearly 5 decades, later evolved into the WTO

Question 33

GATT - what did it do

Answer 33

a set of principles and rules, an intergovernmental bargaining process, a dispute settlement mechanism

Question 34

GATT principles and rules

Answer 34

market liberalism, non-discrimination

Question 35

market liberalism

Answer 35

at the aggregate level, gains from trade outweigh losses, winners can compensate losers

Question 36

non-discrimination

Answer 36

national treatment prohibits the use of taxes, regulates, other policies to advantage domestic production over foreign production, most favored nation (mfn)

Question 37

most favored nation (mfn)

Answer 37

treat all counties as its favorite trading partner

Question 38

mfn exceptions

Answer 38

regional trade agreements, generalized system of preference, temporary responses to crisis

Question 39

intergovernmental bargaining process

Answer 39

new members, tariff reductions, non-tariff barriers, intellectual property rights

Question 40

Doha Development Round 2001, GATT/WTO negotiating round

Answer 40

goal of using trade to further the development goals of the poorest countries agenda items: agriculture market access, transparency in government procurement, etc. nearly reached agreement in 2008 but ended when India and China insisted on special safeguards to raise tariff on agriculture imports

Question 41

Uruguay Round 1986-1994, GATT/WTO negotiating round

Answer 41

most important round since establishment of GATT, created WTO liberalized some trade in agriculture and textile which wasn't included in past agreements, extended rules to services investment and intellectual property, reduced tariffs on merchandise goods, strengthened dispute settlement process

Question 42

US and WTO disputes

Answer 42

defendants tend to lose WTO cases because countries only complain if case is strong

Question 43

Why GATT/WTO?

Answer 43

Domestic concerns (export mobilizations and political cover, domestic commitment) and International concerns (terms of trade and political hold up problem)

Question 44

export mobilizations and political cover

Answer 44

not all domestic actors benefit from freer trade, collective action problem, countries can avoid lobby pressures for protection by joining the GATT/WTO which serves as a political cover

Question 45

domestic commitment

Answer 45

WTO lets actors avoid over-investment by allowing countries to credibly commit to freer trade, allows countries to demonstrate their commitment to competitive market by joining

Question 46

terms of trade

Answer 46

WHO lets countries avoid economic externality

Question 47

political hold up problem

Answer 47

when one state fails to undertake an investment due to the increased ability it would provide another state to extract concession this could happen when trading countries are politically dissimilar, when larger countries trade with smaller countries, and when trade agreements are short term

Question 48

WTO and political hold up problem

Answer 48

WTO can increase the chance of trade agreements being long-term, MFN can discourage states to discriminate particular trading partners, WTO creates norm of operation and system to monitor issues

Question 49

Two-level games

Answer 49

Putnam: International negotiations are made in the shadow of domestic politics

Question 50

Two-level games: how to

Answer 50

Politics at the international level are at level 1 and domestic at level 2, the policies that a government can agree to at the international level are often a function of considerations of political survival domestic politics, the set of policies that are acceptable for a country is a "win-set"

Question 51

what "win-set" is determined by

Answer 51

preference and coalition (level 2), institutions (level 2), negotiation tactics (level 1)

Question 52

the mercantilist era

Answer 52

goal: boost exports and reduce imports

Question 53

mercantilism costs and benefits

Answer 53

in the British colonies in America, many products were placed under enumeration meaning you could only sell your products to Britain, there were also a lot of products that you could only buy from British producers, so citizens of the colonies were provided "protection" by the empire

Question 54

The Slave Trade

Answer 54

coexists partially with the mercantilism era