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Question: The equilibrium is characterized by the following equations  w_i L_i = beta sigma^N _n = 1 pi_ni ...

Show transcribed image text The equilibrium is characterized by the following equations w_i L_i = beta sigma^N _n = 1 pi_ni (1 – beta/beta w_n L_n + alpha Y_n) pi_ni = T_i (gamma d_ni w_^beta _i P^1 – beta _i/P_n)^- theta P_n = gamma [sigma^N _i = 1 T_i (d_ni w^beta _i P^1 – beta _i)^- theta]^-1/theta Under free trade d_ni = 1 Forall i, n, prices are therefore equalized across countries Pi = pn Forall i, n. Suppose manufacturing is the only activity so that alpha = 1 and Y_n = w_n L_n. Use the above three equations to derive the real wage or real GDP per capita, w_n/p_n. (The paper defines it as W_i and you should be able to get equation 23.) If technology at home increases, what happens to the real GDP per capita? What is the impact of an increase in technology elsewhere?

The equilibrium is characterized by the following equations w_i L_i = beta sigma^N _n = 1 pi_ni (1 – beta/beta w_n L_n + alpha Y_n) pi_ni = T_i (gamma d_ni w_^beta _i P^1 – beta _i/P_n)^- theta P_n = gamma [sigma^N _i = 1 T_i (d_ni w^beta _i P^1 – beta _i)^- theta]^-1/theta Under free trade d_ni = 1 Forall i, n, prices are therefore equalized across countries Pi = pn Forall i, n. Suppose manufacturing is the only activity so that alpha = 1 and Y_n = w_n L_n. Use the above three equations to derive the real wage or real GDP per capita, w_n/p_n. (The paper defines it as W_i and you should be able to get equation 23.) If technology at home increases, what happens to the real GDP per capita? What is the impact of an increase in technology elsewhere?