Economics correction
hotnicey
coursehero-intern-_trade_econometrics.docxInternational Trade
1. What was the relative endowment of skilled to unskilled workers (S/U) in 2005? Use the following equation to then solve for ws/wu as implied by observed endowments when we do not take the factor content of trade into account?
a) =
S=6371.4338 ( S is the skilled workers in Canada)
U=21859.566 (U is the unskilled workers in Canada)
= 0.2914692 [factor content of trade FCT not inclusive]
0.2914692 x -0.5 = - 0.2085288061
2. What was the skilled labor factor content of net (exports-imports) trade for Canada in Canada?
For purpose of analysis, the source country (c) selected is Australia and textile industry (j) for year 2005.
] - [ )]
= 6371.4338
= -33.41325
Canada’s World exported textiles = 5508.44
] = 6371.4 x -33.4 x 5508.4 = 82543.84
= [ )]
= 6371.4338
= -33.91325
– = 216079 – 85018 = -133536.01 (as -for skilled labor)
Factor content of trade (FCT) for skilled labor in Canada
= -133536.01
3. What was the unskilled labor factor content of net (exports-imports) trade for Canada inn 2005?
] - [ )]
]
= 21859.566
= -33.91385
World exported textiles = 5508.44
21859.57 x -33.91 x 5508.4 = - 4081928486
= -4081928486
[ )] =
= 21859.57
= -33.91385
= 21859.57 x -33.91385 = -741343.2
for us = 4088315.1 - 741343.2 = 3346972.0
= 3346972.0
4. Define the “factor content of trade adjusted endowment” of each factor in Canada as
= -
= 6371.4338
= - 133536.01
= -
= 21859.6
= 3346972.0
= -3325112.4
5. Use the following equation to solve for relative wages taking the factor content of trade into account
Relative wages
= ( ) -0.5
= 0.0382437 x - 0.5
= 0.0191219
Relative wage rate for skilled (as) labor
Australia to Canada
FCT or (as textiles) = 0.0023519
= 0.0191219 + 0.0023519 = 0.0214738
= 0.0214738
FCT or ( au textiles) = 0.0182996
= 0.08182996 + 0.0191219
= 0.0374215
= 0.0374215
6. By what proportion does the skill premium increase or decrease when we take trade into account
Skill premium is the consistent increase in the wages by skilled labor relative to the wages earned by unskilled labor who are in the same level as the skilled workers.
=0.0101219
= 6371.4338
6371.43 - 0.0101219 = 6371.29
