In the estimation of international trade's casual effect on country's income, InYa+BT+yWi+i, = where Y; denotes...

Transcribed Image Text:

In the estimation of international trade's casual effect on country's income, InYa+BT+yWi+i, = where Y; denotes income per person, T; denotes international trade, W; denotes within-country trade and ; denotes the error term. Please try to explain the possible endogenetiy of international trade and why the proximity, i.e., the distance between a given country and every other country in the world, could be used as a good instrumental variable for international trade. In the estimation of international trade's casual effect on country's income, InYa+BT+yWi+i, = where Y; denotes income per person, T; denotes international trade, W; denotes within-country trade and ; denotes the error term. Please try to explain the possible endogenetiy of international trade and why the proximity, i.e., the distance between a given country and every other country in the world, could be used as a good instrumental variable for international trade.

Answer rating: 100% (QA)

The equation you provided seems to represent a regression model where the income per person Y is regressed on international trade T withincountry trad... View the full answer