Unformatted text preview: Cornell University Gregory Besharov Economics 3610: Problem Set 6 1. Short answer questions. Please limit your answers to no more than six sentences for each question. a. Japanese labor productivity is roughly the same as that of the United States in the manufacturing sector (higher in some industries, lower in others), while the United States is still considerably more productive in the service sector. Most services, though, are not traded. Some analysts have argued that this poses a problem for the United States because our comparative advantage lies in things we cannot sell on world markets. What is wrong with this argument? b. The Ricardian, specific factors, and Heckscher-Ohlin models find that wages should be the same across industries. Figure 3-8 in the text shows the real hourly earnings of production workers in U.S. manufacturing, in all private services, and in information services. Does it imply mean that the models are “wrong.” What are the implications for how we should think about other predictions of those models? “wrong....
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- International Trade