Shoes are labor-intensive and satellites are capital-intensive to produce. The United States has abundant capital. China has abundant labor. According to the Heckscher–Ohlin model, which good will China export? Which good will the United States export? In the United States, what will happen to the price of labor (the wage) and to the price of capital?
Shoes are labor-intensive and satellites are capital-intensive to produce. The United States has abundant capital. China has abundant labor. According to the Heckscher–Ohlin model, which good will China export? Which good will the United States export? In the United States, what will happen to the price of labor (the wage) and to the price of capital?
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter19: International Trade
Section: Chapter Questions
Problem 3QFR
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Shoes are labor-intensive and satellites are capital-intensive to produce. The United States has abundant capital. China has abundant labor. According to the Heckscher–Ohlin model, which good will China export? Which good will the United States export? In the United States, what will happen to the price of labor (the wage) and to the price of capital?
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Heckscher-Ohlin theory is an international trade theory based on the comparative cost advantage and the factor endowment where the factor endowment means the extent to which a country is provided with resources like land, labor, and capital. According to Heckscher-Ohlin's theory, a country should produce goods and services based on its factor endowment for example a capital abundant country should produce capital intensive goods and services and trade these goods and services in the international market for other goods and services.
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