INTERNATIONAL TRADE

INTERNATIONAL TRADE
(ECON 1086‐ RMIT, Australia)
(ECON 1269‐ RMIT, Vietnam)
(ECON 1089‐ SIM, Singapore)
Information on ASSIGNMENT 2
PLEASE CHECK RMIT/SIM BLACBOARD FOR RELEVANT DUE DATE; IT IS
UP TO YOU TO FIND THESE OUT.
Instructions for submission:
1. Click on Assessment tasks on BlackBoard.
2. Click on Assignment 2. It is in red.
3. Scroll down to Assignment Submission.
4. Attach your file by clicking on “Browse My Computer”.
To answer the questions 1 and 3, first get the data and follow these steps.
1. Questions 1 and 3 require you to obtain data from Brazil and El Salvador.
2. In addition to the variables you obtained from the World Bank in doing
Assignment 1,1 also obtain GINI index (World Bank estimate) from the World
Bank’s World Development Indicators for the years 1995-2012.
(http://databank.worldbank.org/data/reports.aspx?source=world-developmentindicators). [Note that if your browser (such as Google) does not open the
webpage, try a different browser (such as Internet Explorer)]
3. Note that the GINI Coefficient is an index and not measured as a currency.
4. 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.
5. DO NOT attach Excel files to the assignment.
1 These were country-level data on imports of goods and services (in current US$), exports of goods and
services (in current US$), GDP at market prices (in current US$) and GDP per capita (in current US$).
International Trade Assignments Page 2
Assignment 2 (25% of your final grade)
Check BLACKBOARD for due dates.
*** Follow the instructions above on how to get the data.
*** Read Chapters 1, 2 and 6 of the textbook very carefully.
1. Using data from Brazil and El Salvador, 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 100 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 diagram for substitutable inputs case, explain in up to 100 words the
Stolper-Samuelson theorem. (5 marks)
3. Assume that both Brazil and El Salvador are unskilled-labour abundant countries.
Based on your findings in Question 1, explain in up to 100 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 Wallet to
the relative price of Wallet. Do this algebraically, and then show what the
curve looks like in a diagram (put the relative price of Wallet on the vertical
axis and the relative quantity of Wallet on the horizontal axis). (2 marks)
(b) Derive the world relative supply curve of Wallet. (2 marks)
(c) Put in the same figure the relative demand curve for Wallet that you found in
part (a) and the world relative supply curve of Wallet that you found in part
(b). Determine the equilibrium relative price of Wallet and the equilibrium
relative quantity of Wallet 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)

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