Reference no: EM131003565

Questions:

a) What was the relative endowment of skilled to unskilled workers (S/U) in 2005? Use the following equation to then solve for ws/wu as implied by observed endowments when we do not take the factor content of trade into account?

w_s/w_u = (S^can/U^can)^-0.5

b) Define exports from country c to country d in industry j as X_j^c,d. In addition, define the unit input requirement for factor f in the production of good j in country c as a^c_f,j. The net (exports-imports) factor f content of trade for Canada can then be defined as follows

F^canf = [Σj(af,j^canX_j^can,world)] - [Σ_d,j(a^d_f,jd, Xj^d,can)]

where f indexes factors, j indexes industries and d indexes source countries.

What was the skilled labor factor content of net (exports-imports) trade for Canada in 2005? What was the unskilled labor factor content of net (exports-imports) trade for Canada in 2005?

c) Define the "factor content of trade adjusted endowment" of each factor in Canada as

S^~can = S^can - F_s^Can

U^~can = U^can - F_u^Can

Use the following equation to solve for relative wages taking the factor content of trade into account

w_s/w_u = (S^can/U^can)^-0.5

By what proportion does the skill premium increase or decrease when we take trade into account?

Attachment:- Canadian Trade.rar