International Economics (ECON 453)

Assignment (5 points)

Instructions

• This is an individual assignment. All assignments will be checked for plagiarism using the Turnitin similarity reports feature in Blackboard.
• You are required to answer the below questions in a Word document which you will upload in Blackboard upon submission. SUBMISSIONS BY EMAIL WILL BE DISREGARDED.

Description

In this assignment you will use the World Development Indicators (WDI) database from the World Bank to compute the comparative advantage of two countries in the major sectors of gross domestic product (GDP): agriculture, industry (which includes manufacturing, mining, construction, electricity, and gas), and services. Go to the WDI website at http://wdi.worldbank.org/tables and use the sections on “People” and on the “Economy”.

1. In the “People” section, start with the table “Labor force structure.” Choose two countries that you would like to compare, and for a recent year, write down their total labor force (in millions) and the percentage of the labor force that is female. Then calculate the number of the labor force (in millions) who are male and the number who are female.
2. Again using the “People” section of the WDI, go to the “Employment by sector” table. For the same two countries that you chose in part (a) and for roughly the same year, write down the percent of male employment and the percent of female employment in each of the three sectors of GDP: agriculture, industry, and services. (If the data is missing for the countries you choose in part (a), go back and choose different countries.)

Use the percentages along with your answer to part (a) to calculate the number of male workers and the number of female workers in each sector. Add together the number of male and female workers to find the total labor force in each sector.

1. In the “Economy” section, go to the table “Structure of output.” There you will find GDP (in $ billions) and the % of GDP in each of the three sectors: agriculture, industry and services. For the same two countries and the same year that you chose in part (a), write down their GDP (in $ billions) and the percentage of their GDP accounted for by agriculture, by industry, and by services. Multiply GDP by the percentages to obtain the dollar amount of GDP coming from each of these sectors, which is interpreted as the value-added in each sector, that is the dollar amount that is sold in each sector minus the cost of materials (not including the cost of labor or capital) used in production.
2. Using the results from parts (b) and (c), divide the GDP from each sector by the labor force in each sector to obtain the value-added per worker in each sector. Arrange these numbers in the same way as the ‘Sales per Employee’ and ‘Bushels per worker’ in Table 2-2 on page 40 of your textbook. Compute the absolute advantage of one country relative to the other in each sector as shown in Table 2-2. Interpret your results. Also compute the comparative advantage of agriculture/industry and agriculture/services (again as shown in Table 2-2), and the comparative advantage of industry/services.
3. Based on your results, what should be the trade pattern of these two countries if they were only trading with each other?

Bonus Question (3 points)

1. Of two products, rice and paintings, which do you expect to have a higher index of intra-industry trade? Why?
2. Access the U.S. TradeStats Express website at http://tse.export.gov/tse/tsehome.aspx. Click on “National Trade Data” and then “Global Patterns of U.S. Merchandise Trade.” Under the “Product” section, change the item to rice (HS1006) and obtain the export and import values. Do the same for paintings (HS 9701); then calculate the intra-industry trade index for rice and paintings in 2012. Do you calculations confirm your expectation from part (a)? Explain. If your answers did not confirm your expectation, explain why not.