If growth in national income is due entirely to growth in the labor force, under the Heckscher-Ohlin assumptions,

Question

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, growth in national income is a result of growth in either capital, labor or both. However, if growth occurs solely due to an increase in the labor force, it implies that there has been no increase in capital. This implies that the capital-labor ratio has reduced, leading to a decline in labor productivity and hence, a decline in per capita income. Therefore, the best choice is option A, which suggests a decline in per capita income.

If Growth in National Income Is Due Entirely to Growth