Macroeconomics
4th Edition
ISBN: 9781464110375
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 5, Problem 5P
To determine
Concept Introduction:
Comparative Advantage: In a trade, a country has
Heckscher-Ohlin model:
- It is the model of international trade based on comparative advantage principle. It is also called H-O model. According to H.O model the country has a comparative advantage in the production of those goods whose factors of productions are abundantly available. It means that the abundant factor has large use in the production of goods.
- It specifies that international trade increase the wage of labors which are intensively used in the production. Take an example America is capital-intensive nation, export of capital increases the wages of skilled labor.
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