Friday, January 31, 2020

Data description Essay Example for Free

Data description Essay The next step of the analysis is to compare the rank order of the relative true factor endowments in Table 1, to the rank order of the trade-revealed factor endowments in Table 2. Comparing these rank orders shows that both rank orders are identical, except that the rankings of land and un-skilled labour are switched. Furthermore, this table demonstrates that the trade performance of Vietnam, measured by exports minus imports, is dependent on the country-specific abundance of land, low-skilled labour. This implies that Vietnam has a comparative advantage in goods that make intensive use of unskilled-skilled and land, and a comparative disadvantage in goods that make intensive use of capital, intermediate and highly-skilled labour. The limitation of the study is that the absolute value of trade-revealed factor endowment (value of F: the left hand side of equation 4) and the relative true factor endowment (value of the right hand side of equation 4) do not coincide. This may be due to five factors: first, a key explanation is that each country uses different production techniques, these differences reflect factor endowment differences. Therefore, factor content studies that use a common technology matrix will systematically understate actual factor content. This leads to a failure in the assumption of factor price equalisation. Second explanation for the early failure to find factor content is an apparent bias in consumption towards locally produced goods. Third, although the input-output tables are becoming available for many countries, they are arguably not the highest quality economic data available. Fourth, the differences between the trade-revealed factor content and relatively true factor endowment also comes from the introduction of costs to international trade, which could have a strong effect on trade volume9. Finally, goods of intermediate factor intensity fall into the non-traded sector, so we tended to underestimate the true factor content of trade. There is a systematic correlation between country capital abundance and industry input usage not only in tradables (where this now suggests specialization) but also in non-tradables (where this suggests factor substitution). Thus, a mismatch can occur in calculating the factor content of trade and relatively true factor endowment. Some researchers are trying to build a new model that predicts some of the technology and demand modifications needed by the empirical factor content studies to make the Heckscher-Ohlin model fit the data. In addition to the two tests, based on the figures in column two and four, Spearmans and Kendalls correlation was computed. The value of coefficient is 0. 9 and the correlation is statistically significant at 97% level of confidence. In addition, Kendalls correlation was also performed for the rank test using information in column three and five, the coefficient is also 0. 9, and it is significant at 96% level of confidence. Therefore, findings of the sign test and rank test support the H-O-V theorem in trade between Vietnam and the world. 6 Conclusion The HOV theorem on trade between Vietnam and the world was tested by measuring both true and trade-revealed factor endowments. Two non-parametrics tests were conducted, the sign test and the rank test. Since the sign test was completely successful and the rank orders of factor abundance according to both methods of measurement are very similar, the HOV theorem is confirmed. The analysis of Vietnams factor endowments has shown that Vietnam has factor abundances in land and un-skilled labour, land whereas it has factor scarcities in capital, semi-skilled labour and highly-skilled labour. This implies that Vietnam has a revealed comparative advantage in goods that are intensive in the use of land and un-skilled labour and a comparative disadvantage in goods that are intensive in the use of capital, semi-skilled labour and highly-skilled labour. Therefore, the theory performed well, indicating that the relevant framework may be a reasonable framework for policy studies. In addition, studies of the factor content of trade may help in addressing policy questions of the impact of openness on national income levels and distribution. In fact, there already is a study mapping measures of the factor content of trade into impacts on domestic relative wages for the United States and other members of the Organization for Economic Cooperation and Development (OECD) under some conditions which such a mapping makes sense. This work has been very important in clarifying issues to be addressed in future work. A major area for future work is taking the empirical frameworks favored by the studies of factor content and find out the consequences of international integration on incomes and inequality. To sum up, study on factor content of trade bring out a deep understanding of how resources may drive patterns of trade between a country and other countries, and between a country and a region. References Bowen, H. P. , Leamer,E. E. , Sveikauskas,L. , 1987. Multicountry, Multifactor Tests of the Factor Abundance Theory, American Economic Review, 77:791-809. Brecher,A. Choudhri,E. U. (1982), The Factor Content of International Trade without Factor-Price Equalisation, Journal of International Economics, 12:277-283.

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