Country A has a large pool of skilled workers earning $50 per hour and a small pool of unskilled workers earning $18 per hour. Country B has a small pool of skilled workers earning $60 per hour and a large pool of unskilled workers earning $8 per hour. Trade theory predicts that if A and B engage in international trade with each other,

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ETrade theory, particularly the Heckscher-Ohlin model, suggests that when countries engage in trade, they will each specialize in producing goods that utilize their abundant factors of production more intensively. Country A, with its abundance of skilled labor, will likely specialize in goods requiring skilled labor, while Country B, with its abundance of unskilled labor, will specialize in goods requiring unskilled labor. This specialization can lead to an increase in demand for each country's abundant labor type, potentially raising real incomes within each country. For Country B, this means that the real incomes of both skilled and unskilled workers could become more equal as the demand for unskilled labor increases due to specialization. Overall, trade can lead to efficiency gains and increased output, potentially raising wages for all workers in both countries.

Country a Has a Large Pool of Skilled Workers Earning