ProblemSet4bANSWERS

ProblemSet4bANSWERS - UBGA 118: International Trade Fall...

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UBGA 118: International Trade Fall 2008 Problem Set #4b (Due Tuesday, October 7, 2008) 1. Article Analysis: Read this article and answer the following questions. David J. Lynch, “Vietnam Living its own Asian Success Story”. The URL is: http://abcnews.go.com/print?id=3949667 a. “One out of five workers leave for another job in Vietnam’s rapidly developing economy, where wages for some skilled positions are rising by double-digit annual percentages.” Use the Specific Factors Model to show how this would affect both the composition of employment and the average real wage rate. Be sure to provide a brief economic explanation for the changes that you show. This question is very poorly worded and suggests that labor is the mobile factor. However, if labor is the mobile factor, then we shouldn’t make the distinction between skilled labor and unskilled labor. b. What fundamental economic changes have Vietnam adopted in order to become one of the fastest growing Asian economy? Like many other HPAEs, such as China, Taiwan, South Korea, and Singapore, Vietnam has opened its market to free trade with rising exports. This has boosted annual growth to an average of 7.8%, making it the second fastest growing economy behind China. Since joining the World Trade Organization, Vietnam has attracted many foreign investors with its “young, well-educated population of enterprising workers and eager consumers.” Last year, Vietnam had foreign investment of $12 billion. Educators in Vietnam are changing their old way of thinking to more industrialized capitalist reforms. Even though the country is still considered a third world country, it has “slashed the share of the population living in poverty by almost two-thirds.” The communist government has also played a huge role in helping the economy grow. It signed a bilateral trade agreement with the U.S. in 2001, which is Vietnam’s main export customer.
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ProblemSet4bANSWERS - UBGA 118: International Trade Fall...

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