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Consider the following Heckscher-Ohlin model. Portugal has 700 workers and 600 units of capital, and France has 1800 workers and 1200 units of capital. Technology
Consider the following Heckscher-Ohlin model. Portugal has 700 workers and 600 units of capital, and France has 1800 workers and 1200 units of capital. Technology is identical in both countries. Wine is capital intensive and cloth is labor intensive. 24 points (1). France is relatively capital abundant. (2). France exports cloth when trade with Portugal opens up. (3). Going from no-trade to free-trade, the capital employment of wine decreases in Portugal. (4). Going from no-trade to free-trade, capital becomes less productive in France for both wine and cloth
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