France and Italy only trade with each other. Each produces wine and bread. The production of bread is relatively capital intensive, and the production of wine is relatively labor intensive. France is relatively abundant in capital, while Italy is relatively abundant in labor. According to the Heckscher-Ohlin model, what product(s) will Italy export?

Question

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, Italy will export the good that requires relatively more labor, which is wine in this case.

France and Italy Only Trade with Each Other