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Eco333 Homework 2




Eco333 Homework 2;Answers Due Nov 27th 3:15 pm (submit through Blackboard). You may;work on the homework in groups up to 3. If you work in groups, please;submit just one copy but put the 2 or 3 names on top of the ?rst page clearly;visible.;For exercises that have blanks (_____), ?ll each blank with a single;word or number. For exercises with ellipses (...), complete the statement;with as many words as necessary. For exercises with words in square brackets;([increase, decrease]), circle one of the words;Instructions for submitting assignment on BlackBoard 1. Open;BB on your browser using your UTorID;2. Click on Course Materials;3. You will see the writing assignment for upload there There are 3 options to upload an assignment.;N.B. Make sure that your le name contains only letters and numbers.;Uploaded les should not include special characters in the le name for example, # ! %?. Do not attach multiple les with the same name.;i. Attach Assignment File;1. Click Browse for Local File;2. Locate le on your personal computer. Once you see the le listed in;the Blackboard window, click the Attach File button.;3. Click Open;ii. Browse for Content Collection item;1. Click Browse for Content Collection item. A pop-up window will;appear.;2. Select the le you want to upload from your Content Collection to the;Assignment tool.;1;3. Click Submit. The pop-up window will close.;Click Submit to send the assignment.;a. An option has been provided to enter comments to the instructor.;b. Click Submit.;Submit - If you are required to submit multiple les, you should submit;all les at the same time. Once you click submit you cannot alter your;submission.;Cancel will ignore any additions you have made to the assignment.;Save as Draft allows you to save the changes you have made to the assignment, so that you may return to it within the due date.;If you have any questions, please contact Simone Laughton (Instructional;Technology Liaison Librarian);If you still have trouble submitting, send an email to the TA and attach;the homework (but please please please try one more time before;submitting to the TA, Blackboard is really the safest/most e cient;way for us to collect your work);1;Homework Questions;Question 1;Serena is the urban economic developer of a Canadian city. She is considering whether or not to make a proposal to develop a diverse economy with;a large number of industries. Her assistant (who took ECO 333) just sent;her a report on the empirical evidence concerning the magnitudes of localization and urbanization economies. The report focuses on the productivity;advantages from agglomeration. Based on the report only, what should she;do?;Question 2;2;Consider an empire divided in 2 regions, Etruria (E) and Gallia (G). The;emperor does not allow any worker mobility between region E and region;G. Region E has a xed population of 13 million. The urban utility curve;reaches the maximum utility with 6.5 million people, and initially there are;two cities, Faesulae (F) and Volsinii (V), each with 6.5 million people. At;time t, City F and city V are identical in every respect.;a.;Focus on Region E. Suppose that at t+1 the emperor names city;F the capital of the empire and starts to provide free music concerts in F;nanced by coersive transfer payments from people in region G. Using the;graph of the urban utility curve, show the eect of the free concerts on the;urban utility curve in city F. When drawing the graph, assume that the positively sloped portion of the urban utility curve is steeper than the negatively;sloped portion (this is the standard case we have extensively discussed in;class). Also assume the utility-maximing population does not change from;time t to time t+1.;b.;People will migrate from city _______ to city _______ because.........;c.;As a consequence of these migration;ows utility in city F [increases/decreases], and utility in city V [increases/decreases];d.;How does the new equilibrium in region E look like? In particular;what is the level of population in city F?;Question 3;A developing nation workforce of 30 million is divided equally between;s;a city and a rural area. The initial common utility level is $50, see below;3;U;Rural;City;10;15 (population);The slope of the urban utility curve, between 10 to 15 million is -$2, while;for the rural curve between 15 and 20 million is -$1. Suppose a populist;government increases rural expenditure (invests in agriculture) which has a;positive eect on utility in rural areas for the same population. Short term;utility in rural areas at the equilibrium population rises to $56.;i) What is the impact of this policy on the distribution of rural and;urban population? What is it impact on the utility of rural and urbans living?;ii) If the government instead did the opposite, invested in infrastructure in urban areas rather than the rural area raising it utility at the equis;librium size to $56, what is the impact now on the distribution of rural/urban;population and utilities?;Question 4;Consider a region with 2 export products (saxophones and soccer balls);and 2 local goods (haircuts and music concerts). The production of each;export good is subject to localization economies, so each city specializes in;one export good. According to the urban economist Grace Slick If my two;assumptions (one for export products and one for local goods) are correct;all the cities in the regions will be the same size Assume that Slick logic;is correct. List her assumptions and explain why together they imply the;region cities will have the same size.;Question 5;Complete the statement: Vancouver provides specialized cultural, legal;medical, nancial, and other services that are not available in small urban;areas in the rest of British Columbia because these specialized service are;characterized by....;Question 6;Density of economic activity and local productivity: Local Spillovers;from Foreign Direct Investment in Ethiopia;Recall the discussion in class on the relation between the density of economic activity and local productivity. In this question you are asked to;think of this relation in a developing country context. The background for;this question draws heavily on research on foreign direct investment (FDI) in;Ethiopia by the following team of researchers: Margaret McMillan (Tufts);Justin Lin (CCER), Deborah Brautigam (John Hopkins University), Xiaobo;Zheng (IFPRI) Bart Minten (IFPRI), Alemayehu Seyoum Taesse (IFPRI);and Girum Abebe (EDRI). Below you nd some suggestions for background;readings.;In the past few years, a major destination for Asian and European rms;has been sub-Saharan Africa. More specically, the Ethiopian leather shoe;manufacturing industry has seen dramatically greater foreign investment;since 2004 (in particular from Chinese and Indian rms). However, relatively little is known about whether these rms are operating in isolation or;integrating their operations, technology, and skills with Ethiopian rms and;people.;From a policy perspective, it is important to collect information on the;interactions between foreign investors and Ethiopian entrepreneurs to assess;ways in which cooperation can be facilitated. This type of information could;be used to target the most desirable partnerships. If this is not done, the;risk is that Ethiopians become discouraged and outright hostile to foreign;investors. Ultimately this could reduce the attractiveness of Ethiopia as a;destination for foreign investment.;Suppose you just joined a research team whose goal is to conduct an;original survey of rms in the Ethiopian leather shoe manufacturing industry;in order to shed light on the interaction between Ethiopian and foreignowned rms, and on the micro-mechanisms behind potential productivity;advantages of domestic rms from being located close to large greeneld;investments by foreign companies.;YOUR TASKS in this question are;list the questions you would ask to shed light on the main dimensions;of interest listed below;explain brie why you think the questions you chose are relevant. They;readings by Javorcik on foreign direct investment in Czech Republic and;Latvia, by Charlot and Duranton on French cities, and Kadokawa on;Japan, and my study on the Veneto region of Italy suggested below;would be helpful for your task (though they are not necessary).;The main dimensions of interest are;1. Spillovers to Upstream Sectors, for instance: (a) types of changes required by foreign-owned rms from local suppliers (which enhance the;productivity of local rms), (b) Improvements actually undertaken by;local Firms in Order to Supply a foreign-owned rm.;2. Types of Assistance Received by Ethiopian Suppliers from foreign Customers;3. Knowledge Spillovers/Communication externalities;4. Knowledge transfer through labor mobility from foreign-onwed rms to Ethiopian rms;5. Location choice by recently established Ethiopian rms and in particular whether and how the choice is aected by the presence of large foreign greeneld projects;Main References (and some more backround readings if you are curious);Charlot, Sylvie, and Gilles Duranton. 2004. Communication externalities in cities.;Journal of Urban Economics, 56(3): 581613.;Javorcik, Beata S. 2008. Can survey evidence shed light on spillovers;from foreign direct investment? The World Bank Research Observer;23(2): 139159.;Kadokawa, Kazuo. 2011. Applicability of Marshall Agglomerations;Theory to Industrial Clustering in the Japanese Manufacturing Sector: An Exploratory Factor Analysis Approach.;Journal of Regional;Analysis and Policy, 41(2): 83;100.;Seranelli, Michel "Good Firms, Worker Flows and Local Productivity;Mimeo, University of California, Berkeley;you can download it from my website;Blog China in Africa: The Real Story;;Article in Financial Times;This is Africa Africa quiet agriculturals revolution;;7;Chinese FDI in Ethiopia: a World Bank survey;;Presentation by McMillan on Ethiopia Leather Industry, Preliminarys;Findings;


Paper#29352 | Written in 18-Jul-2015

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