Practice Questions for Econ 330 (1)

Practice Questions for Econ 330 (1) - Practice Questions...

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Unformatted text preview: Practice Questions for Econ 330 Consider a Heckscher ­Ohlin economy where capital is relatively abundant and labor is relatively scarce compared to its trading partners. True or false and why? 1. On the pattern of trade and welfare a. This country will import goods that are labor intensive b. Social welfare increases with trade. c. These social welfare gains or losses emerge from differences in technology across countries. 2. Suppose this economy places a tariff on the imported good. a. Owners of capital gain from the tariff b. Exports shrink c. Capital and labor both lobby for even more protection. 3. Factor ownership: Suppose each individual owns some capital and a unit of labor; but some individuals own more capital and others less a. Who will be in favor of a tariff? Who is opposed? 4. Now there is an election in this economy over trade policy as in Mayer. a. Since this is a capital abundant country, and capital prefers free trade, majority rule will induce a zero tariff in an election. Consider now a Specific Factors economy, again where the country is relatively abundant in capital, relatively scarce in land, and labor is mobile and employed in both sectors. True or false and explain 1. This country will import goods that use capital as a specific factor – such as manufactured goods. 2. A tariff on agricultural goods harms owners of capital. 3. If labor in each sector has some skills that are specific to the industry in which it is employed, all workers are in favor of protection. Consider now a multi ­sector specific factor model, where each of the many sectors uses a factor that is specific to that sector. Let each individual own a unit of labor and some individuals also own a single specific factor. True or false and explain 1. In the median voter model of Mayer, a narrow special interest made up of owners of a single specific factor could never win a policy of protection for their sector in a majority rule election. 2. If some of these narrow special interests form a lobby and offer campaign contributions to the government, they will always receive some protection in return, following Grossman and Helpman. Consider the Grossman and Helpman model of Protection for Sale. True or false and explain 1. 2. 3. Parties 1. Protection is higher for a sector if everyone is in a lobby. Protection is higher for a sector if government cares more about social welfare relative to campaign contributions. Protection is higher a sector if the industry experiences little import penetration. Suppose left parties are the parties of labor, and right parties are the parties of capital. When would we expect to see left parties advocate in the party platforms a policy of protection? What evidence can you offer for your claim? Suppose left parties are the parties of labor, and right parties are the parties of capital. When would we expect to see left parties in government parties implement free trade policies? What evidence can you offer for your claim? What does it mean for an industry to be concentrated? What does it mean for an electoral district to be marginal? Define party discipline. What is a majoritarian electoral system? Claim: concentrated industries in marginal districts are more likely to get protected in weak party discipline majoritarian systems. True or false and explain. Industries that are widely dispersed across electoral districts have the potential to be represented by a larger number of members of the legislature. Hence they are always more likely to receive policies of protection than are concentrated industries. True or false and explain. 2. 3. 4. 5. 6. 7. 8. ...
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