Question 3. There has been an increase in the wage inequality (gap between the skilled and unskilled wage) in the U.S. and many European countries over the last 40 years. At the same time, these countries have increased their trade with China. Can international trade be a cause of the rising inequality? How can the Heckscher-Ohlin model help explain the rising inequality? Question 4. Consider an offshoring model where the labor usage of four activities in the U.S. and Mexico are as follows: Assembly Component Office R&D Production Services Unskilled labor Mex: 10 Mex: 6 Mex: 4 Mex: 2 U.S.: 5 U.S.: 3 U.S.: 2 U.S.: 1 Skilled labor Mex: 2 Mex: 2 Mex: 4 Mex: 20 U.S.: 1 U.S.:1 U.S.: 2 U.S.: 10 Skilled/Unskilled 1/5 1/3 1 10 Ratio Suppose that the wages of unskilled and skilled workers in the U.S. are 1 and 2, respectively. In Mexico, suppose that the wages of unskilled and skilled workers are 1/4 and 1.5, respectively. Compute the costs of production of each activity in each country. Make a table (a) like the one below and fill it with numbers. Mexico U.S. (b) Assembly Component Production Office R&D Services Which activities are going to be performed in the U.S. and which activities are going to be performed in Mexico?
Question 3. There has been an increase in the wage inequality (gap between the skilled and unskilled wage) in the U.S. and many European countries over the last 40 years. At the same time, these countries have increased their trade with China. Can international trade be a cause of the rising inequality? How can the Heckscher-Ohlin model help explain the rising inequality? Question 4. Consider an offshoring model where the labor usage of four activities in the U.S. and Mexico are as follows: Assembly Component Office R&D Production Services Unskilled labor Mex: 10 Mex: 6 Mex: 4 Mex: 2 U.S.: 5 U.S.: 3 U.S.: 2 U.S.: 1 Skilled labor Mex: 2 Mex: 2 Mex: 4 Mex: 20 U.S.: 1 U.S.:1 U.S.: 2 U.S.: 10 Skilled/Unskilled 1/5 1/3 1 10 Ratio Suppose that the wages of unskilled and skilled workers in the U.S. are 1 and 2, respectively. In Mexico, suppose that the wages of unskilled and skilled workers are 1/4 and 1.5, respectively. Compute the costs of production of each activity in each country. Make a table (a) like the one below and fill it with numbers. Mexico U.S. (b) Assembly Component Production Office R&D Services Which activities are going to be performed in the U.S. and which activities are going to be performed in Mexico?
Chapter17: Income, Poverty, And Health Care
Section: Chapter Questions
Problem 11P
Related questions
Question
please help me with 3 and 4. Thank you
Transcribed Image Text:Question 3.
There has been an increase in the wage inequality (gap between the skilled and unskilled wage)
in the U.S. and many European countries over the last 40 years. At the same time, these
countries have increased their trade with China. Can international trade be a cause of the rising
inequality? How can the Heckscher-Ohlin model help explain the rising inequality?
Transcribed Image Text:Question 4.
Consider an offshoring model where the labor usage of four activities in
the U.S. and Mexico are as follows:
Assembly
Component
Office
R&D
Production
Services
Unskilled labor
Mex: 10
Mex: 6
Mex: 4
Mex: 2
U.S.: 5
U.S.: 3
U.S.: 2
U.S.: 1
Skilled labor
Mex: 2
Mex: 2
Mex: 4
Mex: 20
U.S.: 1
U.S.:1
U.S.: 2
U.S.: 10
Skilled/Unskilled
1/5
1/3
1
10
Ratio
Suppose that the wages of unskilled and skilled workers in the U.S. are 1 and 2, respectively. In
Mexico, suppose that the wages of unskilled and skilled workers are 1/4 and 1.5, respectively.
Compute the costs of production of each activity in each country. Make a table
(a)
like the one below and fill it with numbers.
Mexico
U.S.
(b)
Assembly
Component
Production
Office
R&D
Services
Which activities are going to be performed in the U.S. and which activities are
going to be performed in Mexico?
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