Suppose that, in a real-world situation, a labor-abundant country's tariffs and nontariff barriers are levied relatively more heavily on labor-intensive goods than on capital-intensive goods. In this situation, a Leontief two-factor test would, other things equal, be __________ the country's adherence to the Heckscher-Ohlin trade pattern, in comparison with a situation where trade barriers were absent.
A) biased toward confirming
B) biased against confirming
C) unbiased in its finding concerning
D) biased toward confirming, biased against confirming, or unbiased in its findingConcerning - cannot be determined without more information

Question

Quizplus · Accepted Answer

The Leontief two-factor test would be biased toward confirming the country's adherence to the Heckscher-Ohlin trade pattern, in comparison with a situation where trade barriers were absent. This is because the tariffs and nontariff barriers would make labor-intensive goods more expensive to import, which would lead to a decrease in the demand for these goods. This would, in turn, lead to a decrease in the production of labor-intensive goods, and an increase in the production of capital-intensive goods. This would make the country's trade pattern more consistent with the Heckscher-Ohlin trade pattern.

Suppose That, in a Real-World Situation, a Labor-Abundant Country's Tariffs