Labor-abundant country moves from autarky to trade

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Reference no: EM13861790

Carefully explain, for each of the following two statements, why the statement is either TRUE or FALSE.

(a) "In a 2x2x2 Heckscher-Ohlin context, when a relatively labor-abundant country moves from autarky to trade, the real return to capital in the import-competing industry decreases and the real return to capital in the export industry also decreases."

(b) "In the ‘specific-factors model,' with capital fixed in each sector, when a relatively labor-abundant country moves from autarky to trade, the real return to capital in the import-competing industry decreases and the real return to capital in the export industry also decreases."

Reference no: EM13861790

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