In this assignment you will use the World Development Indicators (WDI) database from the World Bank to compute the comparative advantage of two countries in the major sectors of gross domestic product (GDP): agriculture, industry (which includes manufacturing, mining, construction, electricity, and gas), and services. Go to the WDI website at http://wdi.worldbank.org/tables and use the sections on “People” and on the “Economy”.
a. In the “People” section, start with the table “Labor force structure.” Choose two countries that you would like to compare, and for a recent year, write down their total labor force (in millions) and the percentage of the labor force that is female. Then calculate the number of the labor force (in millions) who are male and the number who are female.
b. Again using the “People” section of the WDI, go to the “Employment by sector” table. For the same two countries that you chose in part (a) and for roughly the same year, write down the percent of male employment and the percent of female employment in each of the three sectors of GDP: agriculture, industry, and services. (If the data is missing for the countries you choose in part (a), go back and choose different countries.)
Use the percentages along with your answer to part (a) to calculate the number of male workers and the number of female workers in each sector. Add together the number of male and female workers to find the total labor force in each sector.
c. In the “Economy” section, go to the table “Structure of output.” There you will find GDP (in $ billions) and the % of GDP in each of the three sectors: agriculture, industry and services. For the same two countries and the same year that you chose in part (a), write down their GDP (in $ billions) and the percentage of their GDP accounted for by agriculture, by industry, and by services. Multiply GDP by the percentages to obtain the dollar amount of GDP coming from each of these sectors, which is interpreted as the value-added in each sector, that is the dollar amount that is sold in each sector minus the cost of materials (not including the cost of labor or capital) used in production.
d. Using the results from parts (b) and (c), divide the GDP from each sector by the labor force in each sector to obtain the value-added per worker in each sector. Arrange these numbers in the same way as in Table 2-2 on page 40 of your textbook. Which country has the absolute advantage in what industry?Why?
e. Then compute the comparative advantage (opportunity cost) of any two sectors (choose 2 sectors out of agriculture, industry, and service) with respect to each other. Based on your results, what should be the trade pattern of these two countries in terms of only the chosen sectors if they were only trading with one another? Explain.
