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Homework #2 Eco333




Question;Homework #2;Eco333;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.;13. 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;2Consider 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 e?ect 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?s workforce of 30 million is divided;equally between;a city and a rural area. The initial common utility level is;$50, see below;3City;Rural;10 15 (population);U;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 e?ect 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?s impact on the utility of;rural and urban;living?;ii) If the government instead did the opposite, invested in;infrastructure;in urban areas rather than the rural area raising it?s;utility at the equilibrium;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;4all the cities in the regions will be the same size?.;Assume that Slick?s logic;is correct. List her assumptions and explain why together;they imply the;region?s 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 Ta?esse;(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 speci?cally, 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;5ways 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 green?eld;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?y why;you think the questions you chose are relevant. The;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;64. 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 a?ected by the presence of;large;foreign green?eld 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): 581?613.;Javorcik, Beata S.;2008. ?Can survey evidence shed light on spillovers;from foreign direct investment??The World Bank Research;Observer;23(2): 139?159.;Kadokawa, Kazuo.;2011. ?Applicability of Marshall?s Agglomeration;Theory to Industrial Clustering in the Japanese;Manufacturing Sector;An Exploratory Factor Analysis Approach.?Journal of Regional;Analysis and Policy, 41(2): 83?100.;Sera?nelli, 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?s quiet agricultural;revolution;;7 Chinese FDI in Ethiopia: a World Bank survey;;Presentation by;McMillan on Ethiopia?s Leather Industry, Preliminary;Findings;;8


Paper#55792 | Written in 18-Jul-2015

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