Consider the Heckscher-Ohlin model with two countries, two goods and two factors of production,...

Question

Consider the Heckscher-Ohlin model with two countries, two goods and two factors of production, skilled and unskilled labour. In this model, the two countries can equalize the skill premium (the wage difference between skilled and unskilled workers) by either engaging in international trade or allowing skilled and unskilled labour to freely move between the two countries. Explain carefully if this is true or false, and why.

Robert · Accepted Answer

The Heckscher-Ohlin model is developed by Eli Heckscher and Bertil Ohlin at the 
Stockholm School of Economics. It is a theory in economics which explains what can be 
most plentifully and efficiently produced. It is a general equilibrium mathematical model 
of international trade which is used to evaluate trade and, more specifically, the 
equilibrium of trade between two countries that have varying specialties. Further,

Consider the Heckscher-Ohlin model with two countries, two goods and two factors of production, skilled and unskilled labour. In this model, the two countries can equalize the skill premium (the wage...

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