Question

Part A)

We saw that the Heckscher-Ohlin-Vanek prediction does not find support in data. Which of the following assumptions of the Heckscher-Ohlin model is likely to be the culprit

Different goods have different factor intensities

Different countries have different endowments

Factors of production are mobile within a country

Countries have identical technologies

Part B)

Which of the following statements describes offshoring?

a)It refers to the export of capital services by a country.

b)It refers to the export of labor services by a country.

c)It refers to the export of goods by a firm.

d)It refers to the purchase of inputs by a firm from abroad.

Part C)

Greater offshoring by the U.S. firms to Mexico can explain

a)the rise in the rent of land in the U.S.

b)the rise in wage inequality in both the U.S. and Mexico.

c)the fall in wage inequality in both the U.S. and Mexico.

d)the rise in inequality in Mexico and the fall in inequality in the US.

Part D)

The simultaneous export and import of Golf Clubs by the U.S. can be explained using

a)the Ricardian Model of Comparative Advantage.

B)the Heckscher-Ohlin model.

c)the model based on economies of scale and love of variety.

d) the Rybczynski theorem.

Answer 1

1 Different countries have different factor endowments.

(Researchers tried to analyse the importance of the assumptions of a theoretical model to conducting empirical work in the Hecksher-ohlin-vanek model.They concluded that different countries have similar factor endowments.)

2) lt refers to the purchase of inputs by a firm from abroad

Offshoring refers to obtaining products from another country.Much of the offshoring invoices outsourcing production to another company it can also refer to simply a re-location of cerain aspects of business to another country.purchasing inputs from another country comes under the purview of offshoring.

3 The rise in wage inequality in both US and Mexico

(Since 1998, inequality in Mexico has declined,risen and decline again.wage inequality has played a huge role in it.

In America, over the last 30 years,wage inequality has increased substantially, with the overall level of inequality now approaching the extreme level that prevailed during great depression.

However labour in Mexico is cheaper compared to America , greater offshoring by us to Mexico happens because of that.

4 The model based on economies of scale and love for variety

US golf clubs were exported to Asian countries like Japan.However economies of scale and investment in high technology production equipment have allowed Japanese producers to effectively produce golf clubs .US Exports fell and US even had to import golf clubs.