Ask Question, Ask an Expert


Ask International Economics Expert

1) Consider two Countries that share the same technology, South Africa and the UK, and two goods, Diamonds and Tea. There is a Free Trade Agreement in place between them. The Capital Labor ratio to produce Diamonds (K/LD) equals 3, while the Capital Labor ratio to produce Tea (K/LT) is 2. Trade between the two countries is described by the following table (Imports have negative sign, Exports have positive sign; the numbers reported are already converted in a common international currency):

                    South Africa      UK
Diamonds             +100       -100
Tea                      -30        +30

Interpret this situation using the lens of the Heckscher-Ohlin Model:

a) Which country is Capital Abundant? Which country is Labor Abundant?

b) Suppose the endowment of Capital for South Africa gets bigger. At constant world prices, what do you expect will happen to South Africa’s production Mix?

c) “Labor unions are likely to oppose the free trade agreement in the UK”: True or False? Briefly discuss why

d) Suppose data is released on the endowment of Capital and Labor for South Africa and the UK, as the following Table describes:
                                               South Africa     UK
Capital (thousands of machines)          1000        3000
(thousands of workers)                       500         2000

Change ONE assumption in the Heckscher-Ohlin model and rationalize the observed pattern of trade between the two countries

2) Consider the reading “China hits back at EU wine over solar panel duties” (

a) Suppose China is relatively capital abundant and wine is produced with a labor intensive technology. What does the H-O model predict?

b) Suppose we have Increasing Returns to Scale in the Production of Solar Panels. One possible interpretation for this “Trade War” is that both countries in the EU and China want to become leading exporters of Solar Panels. Comment briefly on this statement.

c) Suppose we start from a situation in which the EU and China’s K/L happen to be EXACTLY the same! In the initial situation there’s no trade between them.  Suppose we have a demand shock in China and all of a sudden Chinese consumers want to consume more wine; demand for Solar Panels in China is unchanged. Also, demand in the EU is unchanged.  What would the H-O model predict?

d) Consider now the Ricardo’s model of Trade. Suppose China is exporting Solar Panels and importing Wine and trade is balanced. What happens to trade if there’s a positive demand shock for Wine in the EU?

3) find out the value of the Intraindustry Trade Index for Mexico and Germany  using data from the following table

Industry             Exports (millions of Mxn Pesos)      Imports (millions of Mxn Pesos)
Automobiles                        0                                             200
Furniture                         130                                             750
Primary Metal Industries       20                                             500
Coal                                230                                                0
Agricultural Crops              700                                               50

Industry             Exports (millions of Euros)              Imports (millions of Euros)
Automobiles                    1000                                              100
Furniture                          350                                              750
Primary Metal Industries      850                                              500
Coal                                  50                                              300
Agricultural Crops               500                                              700

4) For this part of the Homework, you will have to elaborate data from the Canadian International Merchandise Trade Database(

You are encouraged to use a spreadsheet for this part.

Select “Netherlands” as a Trading Partner. Use Annual Data, month of reference: July.

a) Retrieve Data for 2013. find out the Intraindustry Trade Index after merging Domestic Exports and Re-Exports in a unique category: Exports. You should be summing over XXI categories of Merchandise Trade.

b) Retrieve Data for 1990. find out the Intrindustry Trade Index after merging Domestic Exports and Re-Exports in a unique category: Exports. Is it bigger or smaller than in 2013? What does this seem to suggest about patterns of Trade between Canada and Netherlands over time? Comment

c) Retrieve Data for 2013. Select Section “XI – Textiles and Textiles Articles”, Refind out the Intraindustry Trade index just for this category and report your result. What value do you obtain if you consider only the aggregate values for this section? What is bigger? Is that surprising? Comment

d) Compare now Trade between the Canadian Province of British Columbia and Washington State and between the Canadian Province of Ontario and Michigan.

It seems that for category XIV, B.C. exports more than what imports from Washington State while the opposite happens for Ontario. Can you suggest one or more possible explanations for this fact?

International Economics, Economics

  • Category:- International Economics
  • Reference No.:- M91705

Have any Question? 

Related Questions in International Economics

Consider a model of two stylized countries called germany

Consider a model of two stylized countries, called Germany and China. Germany is an advanced economy with a long tradition of manufacturing highquality goods. China is less developed, but has become the world's secondlar ...

Assignmentanalyze measures of economic growth and

Assignment Analyze measures of economic growth, and comparative and absolute advantage in international trade for the following countries: o USA o China o Saudi Arabia o Democratic Republic of Congo NEED 300 WORDS APA FO ...

Economics problem seta suppose the united states can

Economics Problem Set A) Suppose the United States can produce 20 tons of FOOD or 8 TRACTORS, and suppose Japan can produce 10 tons of FOOD or 3 TRACTORS. B) What is the opportunity cost of producing tractors in the Unit ...

Can lesotho afford an independent monetary

Can Lesotho afford an independent monetary policy? Requirement: 2100 words, 1.5. Spacing, No plagiarism, apa style of referencing. Includes abstract page and conclusion page

Assignment global economy national economies and

Assignment: Global Economy, National Economies, and Competition In the first part of the twenty-first century a great recession struck most of the countries in the world. The next decade has been severally impacted with ...

1 discuss the key motives behind foreign direct investment

1) Discuss the key motives behind foreign direct investment. Compare (statistically) the FDI of US corporations with those of foreign multinationals in the US. Why do many emerging-market economies welcome FDI by US mult ...

Assignmentsuppose that there are two products clothing and

Assignment Suppose that there are two products: clothing and soda. Both Brazil and the United States produce each product. Brazil can produce 100,000 units of clothing per year and 50,000 cans of soda. The United States ...

International economics 7 calculation questionsplease show

International Economics, 7 Calculation Questions Please show the full calculation. Type or pictures of your handwriting are fine! 1. Consider the following data on August 1, 2016 (annual) interest rates US: 0.3% Brazil: ...

Economics assignmentpart i1 assume the united nations

Economics Assignment PART I 1. Assume the United Nations Educational, Scientific, and Cultural Organization (UNESCO) hired you as an economic development expert. Your mission is to travel to several developing countries ...

Projectfor this project you need to analyze and compare the

Project For this project you need to analyze and compare the main economic indicators for 2 countries. The main indicators are listed below and you are to explain what causes each of the indicators to behave in a certain ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro