Question
Assume that there are two factors of production: land and labor. According to the Observatory of Economic Complexity, over 40% of North Korea's imports are
Assume that there are two factors of production: land and labor. According to the Observatory of Economic Complexity, over 40% of North Korea's imports are food products, while under 1% of its exports are food. Over 40% of its exports are machinery, while under 1% of its imports are machinery.
a. Assume machinery is labor-intensive, and food is land-intensive. Is North Korea abundant in land or labor according to the Heckscher-Ohlin theorem?
b. What would be the impact of removing sanctions (allowing more trade) on the real wage in North Korea according to the H-O theorem?
c. What is the impact of opening trade on the real rent of land (the return to holding land) according to the H-O theorem?
d. Which group in North Korea, workers or landowners, would have supported policies that would limit free trade? Please briefly explain.
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