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1. One of the predictions of the HO model is the equalization of return to factors across countries i.e the return to labor at home
1. One of the predictions of the HO model is the equalization of return to factors across countries i.e the return to labor at home should be the same as the return to labor in the foreign country. This observation is not supported by data for any two countries. Return to labor (and capital) is different across countries in real world. Write down 2 reasons why the HO models predictions do not hold in real world? Explain
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