Question

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Question 9.As we saw in the text, the Chinese town of Qiaotou produces 60 percent of the world's buttons (from discarded garbage button collector to button tycoon). One problem is that Qiaotou is a relatively small village and its production is carried out by small, family-owned businesses. What does this tell you about the comparative advantage versus the external economies in the production of buttons? (Chapter 7, Problem 9) (extracted from Wk1 discussion) A Small Village Turn Into Global Button City Qiaotou at Zhejiang Province, China In 1980, three brothers in Qiaotou started up a business by picking buttons off the street. 25 years later, this remote fa ery zio and button we wear and improved standard of living of the town with zip and button tycoons ost Consequence of globalization and cross-border trade: Paddy fields have been cleared for factories Rivers polluted with coloured plastic waste. Suggested answer This is a typical example of external economies of scale. The Chinese industry of buttons gives a cost advantage because of the available pool of skilled labor (with the support of Yongjia county government to improved basic infrastructure, and collaboration networks between firms and nearby universities from Huanan (eg. Huanan Technical University, Huanan University, etc) and Lanzhou (Lanzhou Technical University at Gansu) to raise button quality and handle material waste effectively as well as stimulating new product development). However, dynamic returns are unlikely as the technology used in producing buttons is relative stable (a low learning curve; uses low-tech traditional manufacturing; institutions coordinating learning and innovation in Qiaotou were traditionally weak - very low R&D on button innovation). The only comparative advantage that China might have in this industry is related to the experience (learning from the imported designs and materials from Italy) and cost efficiency of the labor.

Answer 1

The Chinese town of Qiatou produces 60% of the world's button. The town although a very small one, the business was started by three brothers. The business was definitely a comparative advantage, a the firms have thrived so well. Moreover, China has a comparative advantage in producing buttons from discarded garbage button.

However, there have been externalities as well associated with this, hence the paddy fields have been cleared for factories and ponds have been polluted.

The suggestion would be that the Chinese government should look into the matter and help the firms to produce more buttons at a low cost and should also should simultaneously check the pollution levels.