According to the Stolper-Samuelson theorem, international trade for a nation with a relative abundance of skilled labor and a relative scarcity of unskilled labor will tend to:
A) widen or aggravate the income disparity between skilled and unskilled workers.
B) reduce the income disparity between skilled and unskilled workers.
C) lower the wages of both groups of workers.
D) raise the wages of both groups of workers.

Question

Quizplus · Accepted Answer

The Stolper-Samuelson theorem predicts that international trade will benefit the factor of production that is relatively scarce in a country and harm the factor that is relatively abundant. In this case, the country has a relative abundance of unskilled labor and a relative scarcity of skilled labor. Therefore, trade will increase the demand for skilled labor, raising their wages, while reducing the demand for unskilled labor, lowering their wages. This leads to a widening or aggravation of the income disparity between the two groups of workers.

According to the Stolper-Samuelson Theorem, International Trade for a Nation