Let us concentrate on the distributional effects of trade in the US.

Draw the curves representing the relative demand for unskilled labor versus skilled labor in each industry (RDS and RDC) as well as the relative demand for unskilled labor versus skilled labor (RD) economy wide.

On this chart, use the ratio LH (i.e., the ratio of unskilled workers to skilled workers) on the X-axis and the ratio WLWH (i.e., the relative wage of unskilled workers) on the Y-axis.

HINT: recall the equation that equalizes relative supply and relative demand:

LH=LC+LSH=HCHLCHC+HSHLSHS

On this chart, show the relative wage at the equilibrium in autarky. Show the factor intensity (i.e., the unskilled to skilled labor ratio) for each industry in autarky.

On the same chart, highlight the change in relative demand for unskilled workers economy wide once the US opens up to trade. What happens to relative wages? How is the factor intensity (i.e., the unskilled to skilled labor ratio) affected in each sector?

Describe how real wages for skilled workers and unskilled workers are affected by trade in The US. Who is better off? Who is worse off?

In your opinion, will income distribution be more equal or more unequal in the US following trade liberalization? What about in Colombia?