According to the longrun (HeckscherOhlin) model,
When FDI takes place, the investment capital generally
Moves from:
A)southern hemisphere nations to northern hemisphere nations.
B)highwage nations to lowwage nations.
C)Eastern Europe to Western Europe.
D)privately owned enterprises to governmentowned enterprises.

Question

According to the long­run (Heckscher­Ohlin) model,
When FDI takes place, the investment capital generally
Moves from:
A)southern hemisphere nations to northern hemisphere nations.
B)high­wage nations to low­wage nations.
C)Eastern Europe to Western Europe.
D)privately owned enterprises to government­owned enterprises.

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, capital will flow from high-wage countries to low-wage countries, as the latter have a comparative advantage in labor-intensive production due to the abundance of low-cost labor. Therefore, choice B is the best answer. The other options are not supported by the theory.

According to the Long­run (Heckscher­Ohlin) Model

According to the Longrun (HeckscherOhlin) Model