Econ 116 - HW1 Solution

Econ 116 - HW1 Solution - Econ 116 Homework 1 - Suggested...

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Problem 1 (10 points) The data in Table 2 show that services are more labor intensive than commodi- ties, which is necessary to Bhagwati's argument because he states that services are cheap relative to commodities in poor countries because labor there is cheap relative to capital. The data also show that capital intensity increases for both commodities and services as we go from poor to rich countries, which is expected if capital is relatively cheap in rich countries and labor is relatively cheap in poor countries. Problem 2 (15 points) We illustrate this exercise with Japan: Life Expectancy Index = LE Japan - LE Minimum LE Maximum LE Minimum = 83 . 2 - 20 83 . 2 - 20 = 1 . 0 Mean Y ears of Schooling Index = MY S Japan - MY S Minimum MY S Maximum MY S Minimum = 11 . 5 - 0 13 . 2 - 0 = 0 . 871 Expected Y ears of Schooling Index = EY S Japan - EY S Minimum EY S Maximum EY S Minimum = 15 . 1 - 0 20 . 6 - 0 = 0 . 733 Education Index = MY SI Japan * EY SI Japan - EI Minimum EI Maximum - EI Minimum = 0 . 871 * 0 . 733 - 0 0 . 951 - 0 = 0 . 840 Income Index = ln( income Japan ) - ln( income Minimum ) ln( income Maximum ) - ln( income Minimum ) = ln(34 , 692) - ln(163) ln(108 , 211) - ln(163) = 0 . 825 HDI = 3 Life Expectancy Index * Education Index * Income Index = 3 1 . 0 * 0 . 840 * 0 . 825 = 0 . 885 Please note that any small deviations from the HDI reported in the table is
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This note was uploaded on 01/20/2012 for the course ECON 116 taught by Professor Hoshi during the Spring '08 term at UCSD.

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Econ 116 - HW1 Solution - Econ 116 Homework 1 - Suggested...

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