Question

Assignment 4 Part I. Index of Intra-Industry Trade (IIT) for Country In class, we learned how to calculate the IIT index for each industry. How can it measure for a country as a whole? In Appleyard book (p.202), If we designate commodity categories by i, represent exports and imports in each category by Xi and Mi, respectively, total exports and imports by X and M, respectively; and call our index of intra-industry trade, the formula for calculating the degree of country IIT is ElCX/X)-(M,IM) El(X,/X) +(M,IM) ] 1 1 In this formula, Xi /X (or Mi /M) is the percentage of the country's total exports (or imports) in category i and |Xi /X) (Mi /M)\ indicates the absolute value of the difference between the share of exports and imports in the category. The [(Xi X)+ (Mi /M)] indicates the sum of the export and import shares in the category. The E sign means that we are summing over all the commodity categories, and the denominator must have a value of 2 because 100 percent of exports are being added to 100 percent of imports. Use the data in the following table to caleulate countries IIT index. Which country has the highest intra- industry trade? Exports (5) Imports (S) Country A 5,000 10,000 Good X 1,000 8,000 Good Y 12.000 Good Z Country B 5.000 Good R 0 Good S 400 0,000 Gond T 1,000 1,000 50 Assignment 4

Answer 1

Country A 1 - 110000 - LiBooo ool ( 8000 - 1000 18000) T8000 18000 10-12k 18K 18 ( 10,000 + 5000)+ ( 8000 4200 + (070 10,000 + 5000 8000+ 9000 or 12000 18000 1 0000 18000 ) - I- 5K+ 7 k +12R/18k Gk+17K+12K/18/2 24ooo 35000 - 35-24 - "Yas = 0.314 35 Combry B 1- 5k-0 + 1400-6000) + / 1600-1000) ЭК 7K 7K 1600 + 1000 5ktol 1+ 7K 1600ot 4ool 7K 7K - 5K+ 5600 +600 / 762 SK T 6400 +2600 1714 - 0.2 = 11200 21- 2800 14000 1 4000