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Unformatted text preview: hese goods, they are consumed at home.
The low income countries don't trade much. 2. The low income countries are simply poor - they have a low share of
world income. Thus they do not trade much. 3. The pattern of world protection has historically been biased against the
The high-income countries have high protection against the laborintensive manufactured exports of the low-income countries
(regarding them as a threat to local manufacturing).
The low-income countries have high protection against the goods from
the high-income countries (regarding them as necessities). Figure 14.5 K K L Figure 14.6 X2
S 2 B
T A DS K L A 1 C w DN N
r L S' T' N' X1 Empirical relationship between K/L in production and
income elasticity of demand in consumption
DEPENDENT VARIABLE: LOG OF FITTED INCOME ELASTICITY
regressed on log of indirect (inclluding intermediate use) K/L ratio and constant
(ln) K/L ratio
constant standard error 0.145 0.010 (significant at 1%) -0.162 0.006 (significant at 1%) adjusted R2
212.997 correlation between K/L and fitted income elasticities: 0.126 predicted income elasticity at maximum K/L
predicted income elasticity at minimum K/L 1.217
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- Winter '14