Question

Part I. Index of Intra-Industry Trade (IIT) for Country In class, we leamed 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 1, represent exports and imports in each category by X7 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) - (MIMI 7,= 1- [(x,/X) + (M/M)] In this formula, Xi /X (or Mi /M) is the percentage of the country's total exports (or imports) in category and (Xi /X) - (Mi/M) indicates the absolute value of the difference between the share of experts and imports in the category. The [(X1/X) + (Mi/M)] indicates the sum of the export and import shares in the category. The 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 calculate countries IIT index, Which country has the highest intra- industry trade? Exports (5) Imports (5) Country A Good 10.000 5000 Good Y 1000 Goodz 12.000 Country B පෙෙත් F 5.000 Goods 400 6.000 GOODT 1.000 1.000

Answer 1

Solution:

calculation in excel is as below:

C Imports ($) D Xi/X E Mi/ M H (Xi/X)+(Mi/M) IT index Exports ($) (Xi/X)-(Mi/M) 0.28 0.28 0.33 10000 8000 5000 1000 12000 0.56 0.44 0.00 0.06 0.67 0.39 0.67 0.83 0.50 0.67 2 Country A 3 Good X 4 Good Y 5 Good Z 6 Country B 7 Good R 8 Goods 9 Good T 020 5000 400 1600 0 6000 1000 0.71 0.06 0.23 0.00 0.86 0.14 0.71 0.80 0.09 0.71 0.91 0.37

А B H IT index Exports ($) Imports ($) X Xi/ E Mi/M L (X1/X)-(Mi/M)||(xi/X)+(Mi/M) AG5 =1-(SUM(F3:F5)/SUM(G3:45)) 10000 8000 JO 5000 1000 12000 =B3/SUM($B$3:$B$5) =B4/SUM($B$3:$B$5) =B5/SUM($B$3:$B$5) =C3/SUM($C$3:$C$5) =C4/SUM($C$3:$C$5) =CS/SUM($C$3:$C$5) =ABS(D3-E3) =ABS(D4-E4) =ABS(D5-E5) =D3+3 =D4+E4 =D5+E5 2 Country A 3 Good X 4 Good Y 5 Good Z 6 Country B 7 Good R 8 Good S 9 Good T 10 =1-(SUM(F7:F9)/SUM(G7:59)) 5000 400 1600 6000 1000 =B7/SUM($B$7:$B$9) =B8/SUM($B$7:$B$9) =B9/SUM($B$7:$B$9) =C7/SUM($C$7:$C$9) =C8/SUM($C$7:$C$9) =C9/SUM($C$7:$C$9) = ABS(D7-E7) =ABS(D8-E8) =ABS(D9-E9) =D7+E7 =D8+E8 =D9+E9

Hence,

Country A has the highest IIT index .