Bhavik Mody

N13130320
March 2, 2016
Urban Economics
Homework 2
Professor: Karl Storchmann
1. Go to Harvards Cluster Mapping Projects main site (http://clustermapping.us) and
click on Clusters.Scroll down until you see the green bubbles for Traded Clusters.
Select Insurance and click on Go to Cluster Dashboard.On the left sidebar you now
have various choices; select Economic Areas. Calculate the 1998, 2006, and 2013 the
CR4, HHI and Gini Coefficients for employment and for the annual payroll (which is
the product of Employment*Annual Wage). For the Gini Coefficient, assume that all
regions are of identical size. You have to calculate 24 coefficients (see table below).
Year

CR4

HHI
Employment

GINI

1998
2006
2013
Annual Payroll
1998
2006
2013
2. There are 8 equally-sized counties in Steel-Land, which heavily depends on the
production of steel. The steel industry employment in the respective counties is given
by:
Country
Steel
Jobs

25

65

10

10

10

180

15

Calculate the GINI coefficient of job concentration

Sorted
Countries
G
C

Steel
Jobs

Line of
equal
division

Actual
Shares

Lorenz
Curve
(cumulative
act shares)

Line of
equal
division
Lorenz
Curve

5
0.125

0.02

0.02

0.109

0.250

0.03

0.05

0.203

10

Multiplied *
width
(0.125)
0.013671
875
0.025390
625
1

D
E
H
A
B
F
Total

10
0.375

0.03

0.08

0.297

0.500

0.03

0.11

0.391

0.625

0.05

0.16

0.469

0.750

0.08

0.23

0.516

0.875
1.000

0.20
0.56

0.44
1.00

0.438
0.000

1.00

10
15
25
65
180
320

Gini

0.037109
375
0.048828
125
0.058593
75
0.064453
125
0.054687
5
0
0.302734
375
0.605468
75

Gini coefficient = 0.302734375/0.5

Gini coefficient = 0.605 ANSWER
3. Assume there are only 6 counties in a country, and there are only three industries
(beer, bread and shirts) that employ people. The employment numbers are given in
the Table below:
Country 1
Country 2
Country 3
Country 4
Country 5
Country 6

Employment Beer
20
10
12
40
10
25

Employment Bread
4
6
20
10
2
6

Employment Shirts
45
12
10
16
12
12

Calculate the ELQs for the following county and industry combinations:

County 1
County 2
County 3
County 4
County 5
County 6

Employment
Beer
20
10
12
40
10
25

Employment
Bread
4
6
20
10
2
6

Employment
Shirts
45
12
10
16
12
12

Sum

117

48

107

Sum
69
28
42
66
24
43
272

a) Beer and County 2

ELQ = (10/117) / (28/272)
2

ELQ = 0.085 / 0.103

ELQ = 0.83 ANSWER
b) Bread and County 1
ELQ = (4/48) / (69/272)
ELQ = 0.083 / 0.254
ELQ = 0.33 ANSWER
c) Beer and County 6
ELQ = (25/117) / (43/272)
ELQ = 0.214 / 0.158
ELQ = 1.35 ANSWER
4. Labor in Boom and Recession.
Assume there is a labor force of 16 workers at an isolated site. During boom the firm
faces a demand curve of P=100-Q. During recession it faces a curve of 80-2Q. Like
likelihoods of Boom and Recession are 60% and 40%, respectively.How many
workers are employed in boom, how many during recession? What are the
corresponding wages? Calculate the consumer surplus of the firm in boom and in
recession. What is the expected surplus?
There are always 16 workers employed
Boom wages:
P = 100 Q
P = 100 16
P = 84 ANSWER
Recession wages:
P = 80 2Q
P = 80 2(16)
P = 80 32
P = 48 ANSWER
CS in boom:
CS = (16 * 16 * 0.5)
CS = 128 ANSWER
CS in recession:
CS = (16 * 32 * 0.5)
CS = 256 ANSWER
Expected surplus:
Surplus = (0.6 * 128) + (0.4 * 256)
Surplus = 76.8 + 102.4
3

Surplus = 179.2 ANSWER

Expected wage:
Wage = (0.6 * 84) + (0.4 * 48)
Wage = 50.4 + 19.2
Wage = 69.6 ANSWER
5. Now assume a large cluster where the labor supply is infinitely elastic.
Assuming the same demand curves and the same Boom-Recession likelihoods as in
the Question above and the average wage of the isolated site (also from the Question
above), how many workers are employed in boom? How many are employed during
recession? What are the corresponding wages? Calculate the consumer surplus of
the firm in boom and in recession. What is the expected surplus?
Workers employed in boom:
P = 100 Q
69.6 = 100 - Q
Q = 30.4 ANSWER
Workers employed in recession:
P = 80 2Q
69.6 = 80 2Q
10.4 = 2Q
Q = 5.2 ANSWER
CS in boom:
CS = (30.4 * 30.4 * 0.5)
CS = 462.08 ANSWER
CS in recession:
CS = (5.2 * 10.4 * 0.5)
CS = 27.04 ANSWER
Expected surplus:
Surplus = (0.6 * 462.08) + (0.4 * 27.04)
Surplus = 277.248 + 10.816
Surplus = 288.064 ANSWER