International Trade

 

Please refer to Assignment 1 for this data. 1. Note that the GINI Coefficient is an index and not measured as a currency. It is used as a measure of inequality. In the data you downloaded, it is between 0 and 100. The value 0 indicates perfect income equality whereas the value 100 indicates perfect income inequality. 2. Note some observations may be missing for some years for GINI index. That is still OK, continue to select all years (including the missing ones) to do your calculations. 3. DO NOT attach Excel files to the assignment.
Instructions for submission:
1. Click on Assignments on Canvas.
2. Click on Assignment 2.
3. On the right-hand corner, click on Submit Assignment.
4. Attach your file by clicking on Choose File.
5. Once you selected your file containing your assignment, click on Submit

Assignment at the bottom.
To answer the questions 1 and 3, you need to use the data you downloaded
during preparing Assignment 1. Please refer to Assignment 1 for this data.
1. Note that the GINI Coefficient is an index and not measured as a currency. It is
used as a measure of inequality. In the data you downloaded, it is between 0 and
100. The value 0 indicates perfect income equality whereas the value 100
indicates perfect income inequality.
2. Note some observations may be missing for some years for GINI index. That is
still OK, continue to select all years (including the missing ones) to do your
calculations.
3. DO NOT attach Excel files to the assignment.
International Trade Assignments Page 2
Assignment 2 (25% of your final grade)
Check CANVAS for due dates.
*** Read Chapters 1, 2 and 6 of the textbook very carefully.
1. Using data that you obtained for Assignment 1 for Paraguay and Poland, calculate
the correlation coefficient (using CORREL command in excel) between Openness
and the GINI Index for each nation. Report and interpret this relationship in up to
200 words. [Hint: the GINI is often used as a proxy for the ratio of skilled to
unskilled wages in empirical studies]. (5 marks)
2. Using a graph (from your lecture slides) for substitutable inputs case, explain in
up to 200 words the Stolper-Samuelson theorem. (5 marks)
3. Assume that both Paraguay and Poland are unskilled-labour abundant countries.
Based on your findings in Question 1, explain in up to 200 words whether your
data agree or disagree with the Stolper-Samuelson theorem. (5 marks)
4. Consider the Ricardian model given in Question 3 of Assignment 1.
(a) Derive the relative demand curve relating the relative demand for Radios to
the relative price of Radios. Do this algebraically, and then show what the
curve looks like in a diagram (put the relative price of Radios on the vertical
axis and the relative quantity of Radios demanded on the horizontal axis).
(2 marks)
(b) Derive the world relative supply curve of Radios (put the relative price of
Radios on the vertical axis and the relative quantity of Radios supplied on the
horizontal axis). (2 marks)
(c) Put in the same figure the relative demand curve for Radios that you found in
part (a) and the world relative supply curve of Radios that you found in part
(b). Determine the equilibrium relative price of Radios and the equilibrium
relative quantity of Radios under free trade. (2 marks)
(d) Under free trade, which country produces which good(s)? How many units?
(2 marks)
(e) Who gains from trade? Who loses from trade? State labours’ stance towards
free trade in each country. (2 marks)