Assume a two-country, two-good, two-input model where the following relationships hold:

(K/L)_U.S. > (K/L)_ROW

(K/L)_automobiles > (K/L)_shoes

(K/L)_U.S. is the capital-labor ratio in the United States, (K/L)_ROW is the capital-labor ratio in the Rest of the World, (K/L)_automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L)_shoes indicates the capital-labor ratio in the production of shoes.

Assume further that technology and tastes are the same in the United States and the Rest of the World. The relationships shown here indicate that, with no trade, in the United States