International Trade

Running head: INTERNATIONAL TRADE
International Trade
Name of the Student
Name of the University
Student ID

INTERNATIONAL TRADE1
Table of Contents
Data Analysis...................................................................................................................................2
Step 1...........................................................................................................................................2
Step 2...........................................................................................................................................3
Step 3...........................................................................................................................................3
Technical Analysis...........................................................................................................................4
Step 4...........................................................................................................................................4
Reference list.................................................................................................................................11

INTERNATIONAL TRADE2
Data Analysis
Step 1
32.5 33 33.5 34 34.5 35 35.5 36
45%
47%
49%
51%
53%
55%
57%
59%
Italy
Gini Index
Openness
Chart 1: Openness versus Gini Coefficient for Italy
25 25.5 26 26.5 27 27.5 28 28.5 29 29.5
70%
75%
80%
85%
90%
95%
100%
Sweden
Gini Index
Openness
Chart 2: Openness versus Gini Coefficient for Sweden

INTERNATIONAL TRADE3
Step 2
Relation between inequality and openness
A country is considered as open it participates in international exchange. Volume of
export and import thus indicates extent of openness of a nation. Higher the proportion of trade
volume in GDP more open the nation is. Gini index is an indicative measure of inequality in a
country. A smaller value of Gini index implies smaller inequality in distribution of wealth within
the nation (Helpmanet at el. 2017). However, here Gini index is also considered as a proxy
measure for proportion of skilled to unskilled wage. The collected data on Gini index and
openness of Italy gives an estimated correlation coefficient of 0.260. Positive correlation can be
interpreted as to indicate a direct relationship between the two for Italy (Mertler and Reinhart
2016). That is inequality in Italy increase as the country becomes more open. The association
however is weak as shown from a relatively smaller association between Gini index and
openness. The obtained correlation between Gini index and openness for Sweden is 0.488. This
again shows a positive association between inequality and openness as in Italy. The association
however is stronger for Sweden as the estimated correlation is relatively larger for Sweden than
that for Italy (Viner 2016). The positive correlation can also be interpreted as with increase in
openness skilled workers enjoy a gain in wages relative to unskilled workers.
Step 3
Stolper Samuelson theory
In the international trade, Stolper Samuelson theorem illustrates relation between price of
output and factor prices given that each industry maintains a positive production and zero
economic profit. The main argument of the proposed theory is that an increase in relative price of