International Trade and Welfare Theory

SAM4 International Trade and Welfare Theory

Autumn 2024

  • Topics

    This is a course in general equilibrium. 

    The first part of the course deals with welfare theory and (1) gives an introduction to general equilibrium with the aim of understanding the interaction between different markets in the economy; (2) continues to give the basic features of the welfare theory by emphasizing the Pareto criterium and the two main theorem in the welfare theory; and (3) shows the importance of competition and how to intervene in markets to obtain optimal allocation of resources when there are imperfect competition, externalities and public goods.

    The second part of the course deals with theory of international trade and focuses on industry structure and factor reward in a small, open economy. There is a particular emphasis on the Heckscher-Ohlin model, but also other models are used to show the pattern of trade, the gains from trade, and the effects of trade policy and other economic policy.

    The course focuses on current problems and shows how the theories can explain current and empirical observations.

  • Learning outcome

    Upon completion of the course, the students can


    • Describe and explain how the resources are allocated in an economy in general equilibrium.
    • Describe and explain the mechanisms in general equilibrium and the interaction between different markets.
    • Describe and explain the main theorem in the welfare theory and their implications.
    • Explain the policy implications of different forms of market imperfections, and how to correct market failures to reach the UNs sustainability goals.
    • Discuss different types of theories of international trade.
    • Explain the implications of international trade on the industry structure and the allocation of resources.
    • Explain the gains from trade and their distributional effects.
    • Explain the effects of trade policy and industrial policy.


    • Structure current problems.
    • Choose relevant models to analyze current problems.
    • Analyze current problems by means of the theories in the course.
    • Consider to which extent the market economy promotes the UNs sustainability goals.

    General competence

    • Reflect on the limitations of the models.

  • Teaching

    The course consists of plenary lectures, class discussions, group teaching and compulsory group works.

    The course offers ordinary teaching and emphasizes the physical interaction between the students, and between the students and the teachers in the course. All activities require physical attendance, and no activities are recorded. However, the students will get access to prerecorded videos of the most difficult parts of the theories in the course.

  • Required prerequisites

    SAM1 and SAM2 must be passed before the students starts their course in SAM4.

    The students cannot take the exams in neither SAM1 nor SAM2 in the same semester as SAM4 or after they have passed the exam in SAM4.

  • Compulsory Activity

    Approval of group works.

  • Assessment

    4-hour written, individual, digital school exam.

    The course will also have an assessment in the non-teaching semester (spring). This only apply to students with valid course approval.

  • Permitted Support Material

    One bilingual dictionary (Category I) 

    All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support material and  


ECTS Credits