Starting from an autarky (no- trade)situation with Heckscher- Ohlin model,if Country H is relatively labor abundant,then once trade begins
A)wages should rise and rents should fall in H.
B)rent will be unchanged but wages will rise in H.
C)wages and rents should rise in H.
D)wages should fall and rents should rise in H.
E)wages and rents should fall in H.

Question

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, a country will export the good that uses its abundant factor intensively. Since Country H is labor abundant, it will export labor-intensive goods. This increases the demand for labor, leading to higher wages, while the demand for capital decreases, leading to lower rents.

Starting from an Autarky (No- Trade)situation with Heckscher- Ohlin Model,if