lecture note 9

8 so instead of exporting a lot of these goods they

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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 low-income countries. 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 coefficient (ln) K/L ratio constant standard error 0.145 0.010 (significant at 1%) -0.162 0.006 (significant at 1%) adjusted R2 observations F 0.059 6216 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 0.610...
View Full Document

Ask a homework question - tutors are online