Urban Economics

Problem Set #2
due Wednesday Mar 2, 11pm, ONLY ONLINE at NYU Classes
You can only submit one single file. Once submitted a Problem Set cannot be recalled anymore.
DO THIS PROBLEM IN EXCEL!
The answers to each question should go on the first worksheet. The way how you found the answers, esp. for Q#1, should be on
subsequent worksheets; all in one file.
(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

1998
2006
2013
Annual Payroll
1998
2006
2013

GINI

(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:
County
Steel jobs

A
25

B
65

C
10

D
10

E
10

F
180

G
5

H
15

Calculate the Gini coefficient of job concentration.

(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:
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

Calculate the ELQs for the following county and industry combinations:
(a) Beer and County 2
(b) Bread and County 1
(c) Beer and County 6

(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?
(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?