Heckscher-Ohlin (HO) Model Consider a Heckscher-Ohlin (HO) model in which the two countries are the United States and Colombia. For simplicity, assume that the United States is the home country. The two factors of production are labor and capital. Workers and capital owners receive earnings W and R, respectively. The elements Earnings are denominated in U.S. dollars. In this economy, two goods are produced: smartphones (S) and coffee (C). We assume that capital is sufficient in the United States and labor is sufficient in Colombia. Finally, we assume that the technology is the same in both countries, and that the production of smartphones is capital-intensive, while the productionof coffee is labor-intensive.

Let us assume now that both countries open up to trade. Prices of coffee (PCW) and smartphones (PSW) are determined on international markets. Let us assume that: PSPC